Lower Pecan Prices in 2012/2013 Led to a Significant Increase in Consumption. Where does the Industry Go From Here?

October 02, 2013

The final 2012 export figures were published last month by the USDA Foreign Ag Statistics Service (FAS) and, as expected, exports were up dramatically. Overall exports climbed from 150.64 million pounds (inshell basis) to 200.62 million pounds; a new record.  While exports to China accounted for 34.4 million pounds of the increase, exports to all of the other major pecan importing countries were up.  Export shipments of shelled meats continued to rebound; up approximately 11%.

Total consumption is also up from 385.6 million pounds (inshell basis) a year ago to 452.8 million pounds; net basis. This is also a record.   While not as dramatic as the total consumption figures, domestic consumption was also up. The increase was minimal; 248.7 million pounds vs. 244.7 million, but the increase temporarily halted a five year slide.  Domestic consumption is still down significantly from its 2008 high of 311 million pounds and any further gains will be totally dependent on new crop prices.

Based on last month’s USDA Cold Storage Holdings, it would appear that lower prices have finally gotten to the consumer. Since May, 88 million pounds have been shipped.  With almond, walnut and pistachio prices all at or near record highs, shipments should continue to be good.

The elephant in the room is China.  Having purchased almost 100 million pounds this past year, will they need to buy heavy this year? Over the prior five years they purchased an average of 59 million pounds per year from the US.  While early sales to China would indicate stronger prices lie ahead, did they really increase their consumption by 34 million pounds or were they simply hedging their bets that this year’s prices would be higher?  Historically they have purchased heavily in the long years to minimize the impact of higher prices in the short years.  Further, with South Africa becoming a major player, do they still need to press the US market as early as they have in the past?  South Africa’s crop was much smaller this year which may account for some of the early market pressure.  However, we have already seen what can happen to consumption when prices get over $6.00/lb for meats.

Overall, the information coming from the Government last month was good. Current market conditions should lead to more good news in the short term. Long term, the pecan industry has a great opportunity ahead of it. The big question really is what will they do with it?

Finally, I have added a number of downloadable graphs to the statistics page of my website highlighting many of the above points.