January FAS Pecan Export Data: Good News or Bad?

March 13, 2013

Last week’s release of the January export figures contained both good and bad news.  The good news; exports continue to be up dramatically over the same period last year.  The bad news; exports continue to be up dramatically over the same period last year. Confused? On the surface, the USDA Foreign Ag Statistics Service (FAS) data for the export year beginning August 1, 2012, shows overall exports up approximately thirty-seven percent. Good news for an industry that watched overall consumption drop ten percent over the past two years. What’s more, if you are a grower who was able to produce a product that China wanted, the report contained a lot of good news.  Exports to China (including China, Hong Kong and Vietnam) are continuing at a record pace. As stated in last month’s update, China has already purchased more than what they purchased for the entire 2011 crop year and should set a new record when the February shipment figures are released early next month.  While available supplies of large size high yielding nuts are pretty much exhausted, there is still an excellent chance that China could purchase upwards of 100 million pounds (inshell basis) by July 31st.

So what could be the bad news?  Because the retail segment of the industry took the biggest hit to consumption during the recent downturn, and because it can take up to six months before the consumer realizes any price reduction, the retail sector has yet to respond to the lower prices. While many within the industry anticipate a significant increase in domestic retail sales later this year, the current export numbers are disconcerting when one considers that exports of shelled meats are actually down even after an almost fifty percent drop in prices. Further, extrapolating current data thru this crop year would seem to indicate that overall domestic sales may only move up slightly and nowhere near enough to erase the twenty percent loss in domestic consumption experienced over the past two years. While it is far too soon to draw any firm conclusions, this would seem to indicate that industrial customers who switched from pecans to other nutmeats during the record high prices of the last three years have not switched back even with the current competitive pricing. Further, even with the larger than anticipated supply, the additional exports continue to come at the expense of both the domestic and overseas meat markets. Customers who had been using shelled pecans for years have been forced to switch to other alternatives because of insufficient or uncertain supplies (see related graph on the ‘Pecan Crop Statistics’ page). This is business that may now be harder to get back than in the past.

Years ago, the Moray Eel was inadvertently released into the Great Lakes.  With no natural predators, it wasn’t long before the eels killed off all of the Great Lakes Salmon and the various industries that relied on the Salmon for a living.  It took decades to reverse the trend. Now, because they didn’t learn from their previous experience with the Moray Eel, the Great Lakes fishing and tourist industries are facing an even greater threat from the Zebra Mussel. The Pecan industry is facing a similar situation. Just ask anyone who grows Native pecans; or any of the US Sheller’s who have watched as their domestic business continues to disappear. While there have been efforts to improve meat sales overseas, to increase the supply of improved varieties and to open new overseas markets, the industry needs to do more to differentiate Pecans from the other nut meats.  Unlike the other major tree nuts, the Pecan industry is blessed to have a true Native variety.  Natives are preferred in the baking and ice cream business yet there have been no marketing efforts to exploit that advantage.  They are naturally organic, have a better flavor profile when used as an ingredient and make beautiful toppings on fine confections, desserts and salads.  Then there is the problem of not enough big halves and too many pieces.  What is being done to get industrial ingredient users, and consumers in general, to understand the benefits of using smaller halves and more pieces? Bigger is not necessarily better.

Yes, overall consumption is going to be up significantly this year. That will eventually push prices higher.  Combined with what could be a true off-year crop, prices could go much higher. However, it has been said that those who fail to learn from history are destined to repeat it.  Unless there is a coordinated effort to address the current situation, certain segments of the industry could end up going the way of the Great Lakes Salmon.  It is long past time to address the impact of the 800-pound gorilla sitting in the room. It’s in everyone’s best interest to do so sooner rather than later.

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