USDA Projects a 2012 Pecan Crop of 302.8 Million Pounds

The USDA released their final 2012 crop estimate today lowering their October 2012 projection to 302.8 million pounds (inshell basis).  Assuming that this figure is correct, and barring any natural disasters, the supply situation shapes up as follows:

Earlier this week the USDA released the current Cold Storage Holdings.  While at first glance the numbers might appear a bit disconcerting, it should be remembered that this year’s harvest started several weeks earlier than last year, both in the US and in Mexico.   As such, it may not be best to make a month to month comparison between years. Due to the increased supply of early new crop inshell, it would appear that the December 2012 figures are more in line with January 2012, November 2012 is more in line with December 2011, etc.  On the surface, the numbers do not appear to reflect the significant increase in consumption that has already occurred, particularly overseas. A good example is China. Between August 1^st and November 30^th, China had already consumed 29 million pounds more than they did during the same period a year ago.  During that four month period, China imported 59.7 million pounds (inshell basis) from the US.  That is only 5 million pounds less than what they imported for the entire 2011 crop year.  Overall exports, as well as domestic sales, are also higher. With Almonds trading over $3.00/lb (if you can get a quote), Walnuts trading well above $4.00/lb and Pistachio kernels over $9.00/lb, Pecans are by far the best value for the money and will continue to be well into late summer.

As for the current weakness in the inshell market, rest assured that every pound will eventually be purchased.  They are still sitting there because the Sheller’s have temporarily run out of money. On September 30, 2012, the US Pecan Shelling industry had to write down 121.2 million pounds of inventory. On a meat basis, and depending on the yields, that means that the Shelling industry lost between $70 and $120 million. Even at current market prices, banks have not been willing to loan money to an industry that sustained such huge losses in a span of only twelve months.  Further, the small size of the nuts in this year’s crop, and the increased volume of natives, limits who they can be sold to as most shelling operations are not set up to handle the smaller nuts. Eighteen months ago the industry experienced unprecedented historically high prices.  High prices are the best cure for high prices (the reverse is also true).The pendulum has now swung to the other extreme. Expected increases in consumption will eventually solve the current inshell problem. However, as long as the industry continues to sell the bulk of its best nuts to China, with no regard to the impact on the other 75% of the world’s Pecan markets, this will continue to be a problem. Having said that, I suspect that the Cubs will win a World Series before the Pecan industry gets serious about developing an industry approach to the various issues it now faces.