Pecan Market Update

November 09, 2011

As predicted in my October Pecan Crop Update, the industry carried almost 96 million pounds of the 2010 crop into 2011. While the bulk of the carry out was made up of meal, midgets, small pieces and off grades, most of which is not in great demand, it is still product that needs to be sold. As such, barring some unforeseen natural disaster, should the crop come in as currently forecast, this is how the supply situation shapes up:

2010 Carryout (estimate) 95,736,360
2011 US Crop (USDA estimate) 251,700,000
2011 Net Imports from Mexico (estimate) 110,000,000
Total Supply 457,736,360
Less Consumption (Net) 365,966,000
2011 Carryout (estimate) 91,470,360

Based on the anticipated supply and the reduction in purchases being made by China, field prices have weakened in the past two weeks causing some Sheller's to reduce spot meat prices. Also contributing to the market's current supply situation is the fact that since August, Mexico has shipped over 36 million pounds (inshell basis)* into the US. While the overall impact has been to force prices lower, it should be remembered that prices are only down from the record prices of the past few months; most sales are still at levels above January's contract prices. Based on feedback received during my recent trip to China, inshell prices had gotten too high, especially since Chinese traders had no cheaper inventory to average with. Since much of the consumption in China is trader driven vs. consumer based, the market was due for a correction. However, as the traders still need a certain amount of product to handle Chinese New Year demand, buyers can be expected to step back into the market, until sometime in late November or early December, once prices get to more competitive levels.

While market prices certainly command attention, of more significant concern to the long term health of the industry is the USDA's recent announcement that they will no longer provide subjective Pecan Crop estimates. Effective immediately, gone will be the October, December and January estimates. The only crop figures that will be provided will be the final crop figures published each July. While the Almond, Walnut and Pistachio industries have internal mechanisms capable of providing crop data, the Pecan industry possesses no such capability. As such, unless the industry, with the help of the food industry, is able to get the USDA to reverse their decision, the only crop information available will come from the various grower groups and the National Pecan Sheller's Association none of which have the capability of providing impartial estimates. The National Pecan Grower's Council and the National Pecan Sheller's Association are both evaluating possible courses of action, but with no formal structure, providing a coordinated industry response could prove difficult at best. If the industry is able to muster the support of all of their Senators and Representatives, nothing is impossible. The question is, can the various industry groups get their collective acts together?

As always, should you have any questions, please do not hesitate to contact me at 630-377-2628.

*Several significant errors have been found in the recently released FAS pecan import and export data. Until FAS resolves those issues, exact figures will be hard to develop.