How will the U.S. peanut industry dig its way out of this mess?

That's the question I keep asking myself. For the second time in two years, salmonella has been linked to peanut processing plants, both of them in Georgia. By one estimate last week, peanut butter sales were down 25%.

Jif – a brand in the clear – started running newspaper ads last week that emphasize the safety of its products, stressing that there is no connection between its peanut butter and tainted supplies.

Peter Pan, also blameless, was expected to launch a similar PR campaign. Both are including discount coupons to jumpstart sales. As one marketing consultant told the New York Times, it's unusual for companies to buy ads saying their products are safe unless they are being tarred with the same brush and taking a financial beating.

It would be surprising if this current outbreak of salmonella hadn’t taken a toll on the 2 mainline peanut butter lines. According to the last estimate, 8 deaths and 575 illnesses have been connected to tainted peanut products from the Blakely, Georgia, plant operated by the Peanut Corporation of America (PCA). All hell began breaking loose in January, and every day for 2 weeks there were new reports of recalled products that carried peanut-based ingredients from PCA’s facility.

The crisis couldn't have come at a worse time.

U.S. peanut stocks are on the heavy side, so the last thing the industry needed was a slowdown in inventory drawdown. Plus, the country is in a recession. That’s not good news for the auto industry. But it would certainly be favorable for a low-cost snack and protein food like peanut butter. But any potential gain quickly evaporated when the first recalls started in January, followed by the federal government pulling peanut products from school lunch programs in three states after finding that the peanut-based foods came from the PCA plant.

Even though the plant produces only a small fraction of the peanut products sold in the U.S., the entire industry fell into a public relations snake pit.

To make matters worse, PCA's CEO, Stewart Parnell, had been servicing on USDA's Peanut Standards Board, which advises the ag secretary on quality and handling standards. (He has since been removed.) Investigators are now trying to determine if the company knowingly shipped suspect products. We could see a backlash that affects standards and inspection regulations, not just with peanuts but with ag products well outside of Georgia. And how do you argue at this point that the foxes weren’t guarding the hen house?

Everybody pays, too. With all this uncertainty, farmers are having a hard time locking in contracts, according to a couple of reports, and the price of peanuts – which had been trending upward since late 2008 – slipped into a sideways pattern after recalls started in January. Argentina could use all this to nudge a bit more into U.S. export markets.

Admittedly, people will come back to peanuts, but how soon and how much?

I wish I knew since I've got a vested interest in the industry, myself. We publish PeanutFax, a weekly crop and pest report during the production seaon.

Beyond that, I'm also a consumer. About every 3 weeks, I go through a 28-ounce jar of Jif Extra-Crunchy. No kidding.

I saw firsthand how much confusion developed about what was safe and what wasn’t. At my local Brookshire's I overheard a shopper asking her husband if he really wanted to buy peanut oil for a fish fry. "Isn't that what killed some people?"

My 84-year-old diabetic neighbor asked if she should throw away a perfectly good jar of Peter Pan, fearing it would make her sick. Peanut butter has been an important part of her nutritional package, and I told her it was safe, then went next door and ate a tablespoon of it, myself, just to make my point.

Two years ago this month ConAgra recalled stocks of its Peter Pan brand and a generic it produced for selected stores. The Centers for Disease Control estimated that 46 people came down with food poisoning after consuming peanut butter believed contaminated with salmonella. Retailers pulled Peter Pan on such a wide basis that even Jif became hard to find.

If all that had happened 10 years ago, it probably wouldn't be important today. But that first outbreak lingers in the minds of some consumers, so yet another crisis – this one with funerals attached – will make the comeback harder and longer. So, what should the industry do? It can start by policing itself, independent of whatever steps are taken by state and federal agencies in the future. Put independent inspectors in plants on a regular basis and ensure that standards for cleanliness and safe processing are followed.

Plants would receive certification that they are following accepted, stated guidelines and would receive certification that could be carried forward to companies that incorporate those peanut-based ingredients into other products, like cookies, ice cream and snack foods. The certification, in turn, could be placed on the label of that final product.

Will this cost money? You bet.

How much? Don’t know.

The bigger question: can the peanut industry – from growers through final manufacturers – get itself together enough to do much more than it’s already done? For one thing, the industry seems “over grouped”: a national organization, a couple of regional bodies and a state association or checkoff body in most of the main producing states. Reluctance to give up sovereignty will impede whatever steps might be taken.

After the 2007 salmonella outbreak, nobody seems to have set up a disaster plan or given much thought to the idea that any of this could happen again. Most of the press releases I’ve seen from various organizations were merely reactions to initial federal findings. It took until last Friday for Jif to crank up its own run at damage control.

No organization enjoys thinking about such matters. But the potential for this kind of disaster always lurks around the corner when you grow and process something that goes go into school lunch programs.

I’m not an industry insider, just a guy on the edge who writes about insects, plant diseases and irrigation timing. But I’m in a somewhat unique position because I’ve also been following the almond industry in California. Later this month we’ll begin publishing a crop and pest report covering that crop. We’ve been building up to this for a couple of years, and I’ve been tuning into issues and trends with almonds.

Here’s the interesting parallel…

Over a 5-year period, California’s almond industry experienced 2 food safety incidents in which raw almonds were recalled after salmonella was detected. The almond industry, itself, determined that strong steps needed to be taken to prevent future problems. The industry invested in developing more effective and practical approaches to reducing germ-based contamination.

The industry, through the Almond Board of California (ABC), adopted what it simply called the Action Plan, which included phasing in pasteurization of most almonds going into the market. The federal government didn’t mandate pasteurization, but ABC pushed for it and then gained authority to require it for most almonds.

Drastic as that sounds, it went a long toward regaining confidence in an industry that already had 2 strikes against it. California exports significant portions of its almond crop to both Europe and Asia, and its public image could not sustain another recall.

ABC can move more decisively because California is where the almonds are grown, at least the ones that matter. It was easier to gain consensus on new approaches where everyone was operating within the same state.

With peanuts, how do you build consensus across 8 states that have varying acreages, interests and regional outlooks? I don’t know.

Coming up with money would be the easiest part. Moving everyone in one direction, now there’s the trick.

-- Owen Taylor