While there was a large inshell dissappearance in March, don't expect prices to go through the roof.
April 24, 2009
Based on the March Cold Storage holdings, it would appear that consumption is running well ahead of expectations. The March release showed an overall decline in the Cold Storage figures of over 19 million pounds (inshell basis), well ahead of historical figures for the same period. While the March figure for meats increased 966,000 pounds, inshell figures showed a 21.3 million pound disappearance. With many Shellers reporting excellent contract shipments during the period, part of this drop can be attributed to the fact that contract prices, as well as most spot prices, are at or below those of a year ago. However, a significant proportion of the drop can only be attributed to increased purchases by the Chinese. Since January, they have stepped up their purchases significantly as prices remain very competitive in this 'off-year' market. This has helped to stabilize what could have been a very weak market. However, this is a two edged sword. The Chinese buy only the best quality inshell; inshell that generally produces high quality Fancy Jr. Mammoth and Mammoth Pecan Halves. As these items were already in short supply, this could create an even greater shortage of large size halves as we move into the summer and early fall. Topper and Medium Halves are also in short supply due to the small native crop this past fall. Much of the inventory currently being held by the industry is in piece sizes that can be difficult to move. As such, we could see a significant price spread between pieces and halves as we enter the fall harvest.
In recent days, some growers have expressed concern relative to the early April freeze that occurred from the Red River to San Antonio and the heavy rains that have hit Georgia over the past few weeks. However, while the crop may have sustained some damage as a result of the aforementioned situations, and barring any natural disasters going forward, being that this is the 'on-year' crop, both Texas and Georgia should still produce large crops. Since 1990, the average 'on-year' crop has been approximately 329 million pounds. This figure drops to approximately 310 million pounds if the 1999 (406.1 million pounds) and 2007 (387.3 million pounds) crops are removed from the calculation. Three hundred ten million pounds is not beyond the realm of possibility. Add to that an expected good crop from Mexico, and one could conclude that there should be plenty of Pecans to handle demand, even if the Chinese step up their buying. That doesn't mean that there won't be shortages of some items (i.e. Jr. Mammoth and Mammoth Pecan Halves), but overall, the industry should be able to handle anticipated demand without prices falling apart or going through the roof.