May FAS Export Data Suspect. US Pecan Growers Hope to Get Government Reimbusement for Tariff Related Losses

For those who eagerly await the monthly release of the USDA FAS export data, you probably were surprised to see that the US exported NO inshell to China during the month of May.  While some will say that this is a result of the new tariffs, please remember that the tariffs hadn’t taken effect yet.  Further, while China didn’t import one pound of US inshell in May, worldwide US inshell exports were up over 2 million pounds. Obviously, there is a problem.  Either GATS did not correctly enter the data given to them by the Department of Commerce (Census) or Census didn’t correctly record the data that was provided to them.  Either way, it is statistically unrealistic to believe that US exports of inshell increased 2 million pounds in May with none of it going to China. The Department of Commerce has been made aware of the issue and is working to determine the source of the problem.  Based on the time required to correct previous ‘deviations,’ it may be awhile before the issue is resolved.

This past Tuesday, Lalo Medina, current President of the Texas Pecan Growers Association and President of Pecan Grove Farms and Nursery, closed the groups annual meeting with his estimate of the 2018 Pecan Crop.  At 303 million pounds (inshell basis), barring some natural disaster, it would appear that there will be plenty of pecans to handle anticipated demand (the Tri-State Growers estimated the crop at 300 million). 

As one might expect, the bulk of the conversations at the bar revolved around the possible impact of the recently imposed tariffs on US inshell pecans destined for China.  While they will certainly have an impact on pricing this fall, and there will be losses sustained by some growers, contrary to what many are claiming, the sky is not falling.  Prices have been declining since December 2016, and based on currently available supply estimates, were expected to continue declining well into the fall.  That’s what happens when prices are artificially raised to unrealistic levels; the market eventually corrects itself. Now, having effectively removed one-half of the world’s available supply of inshell from the pool China can buy from, one would expect prices being paid to South African farmers to spike dramatically higher. After all, tighter supply should lead to higher prices. However, that has not happened. Prices have continued to decline.  Why?  Because China purchased too many pecans last year. As such, regardless of the tariff, they don’t need to press the market this year.  Now, with record crops projected for Mexico and South Africa, and prices continuing to weaken, US Growers are hoping to get the US Government to reimburse them for the losses they’ll incur.  However, they aren’t asking to be reimbursed based on the price they would have gotten had the tariffs not been imposed, they want to be reimbursed based on prices they received last year; prices that were too high to begin with. The US Government should not be in the business of setting price levels. Instead of discussing Government guarantees for profits that most likely wouldn’t have existed anyway, the time would be better spent discussing how to reduce the industry’s dependence on an unreliable business partner.