How High is High?

December 01, 2010

Based on recently released October Cold Storage figures, even with a later than normal start to the 2010 harvest, the industry shipped approximately 25 million pounds (inshell basis) of product during the month.  Using revised September 2010 figures, the supply situation is shaping up as follows:

2009 Carry-out 91,033,300
2010 US Crop (estimate) 271,300,000
2010 Mexican Imports (estimate) 105,000,000
2010 Total Supply (estimate) 467,333,300
2009 Gross Consumption/Disappearance 458,058,000

As more product has started to come to market, there is growing concern that the next USDA estimate (due out December 10th) will project that the 2010 crop is substantially smaller than the original 271 million pound (inshell basis) estimate.  The average 'off-year' crop is usually around 190 million pounds. However, no one expects the crop to be that small. In the meantime, Chinese speculators continue to cash in on the late crop forcing prices to record levels.  While there is only about seven years of sales data on Chinese purchases, thereby making accurate forecasts relative to their purchases difficult, the speculators have now raised their own costs almost 100% (based on FAS figures for the recently completed 2009 crop year).  As such, it is hard to believe that the Chinese can afford to continue purchasing at current levels.  In the meantime, while the US consumer has yet to see the full impact of $6.00 plus pecan meats, some stores have raised their prices on one-pound bags of shelled pecans to anywhere from $8.80/lb to $10.00/lb.  It will probably take six months before the industry will feel the full impact of the current pricing structure on consumption, but based on prior experience, it doesn't take much for a short crop to become long.  As the Hunt brothers found out years ago, no one is bigger than the market, not even China.