USDA Releases First 2015 Pecan Crop Estimate
October 12, 2015
In September 1986, the USDA projected a US Crop of approximately 180 million pounds; considerably smaller than anyone in the industry had expected. As one might imagine, prices in the field climbed dramatically. Meat prices also soared. Fearing that there would not be enough pecans to fill anticipated demand, the US Shellers jumped into the market and purchased every pound they could get their hands on as quickly as they could. Then, just as unexpectedly, in early December 1986, the USDA revised their numbers. Evidently they had underestimated the crop, a crop that turned out to be 272.7 million pounds. The resulting 33% error caused prices to tumble. Within thirty days, meat prices tumbled over 30%. Unfortunately, since the Sheller’s had already purchased their inventory and had not yet written any contracts, there was nothing left to do but count the losses; tens of millions of dollars of losses! The industry’s largest Sheller eventually had to declare bankruptcy, as did two large Grower-Shellers. Several other Shellers had to dramatically curtail operations. It would be four years before the industry was able to return to some semblance of normalcy.
Why do I mention this? I do so because Friday’s USDA Crop Production Report estimated the 2015 US Crop to be some 55 million pounds lower than the most recent Grower AND Sheller estimates. At 272.3 million pounds, that would put the 2015 crop only a few percentage points higher than both the 2013 and 2014 crops. If the USDA figure is correct, this is how the 2015 supply situation could shape up:
2014 Carry-out (estimate) 125,000,000
2015 US Crop (USDA estimate) 272,340,000
2015 Mexican Imports (estimate) 180,000,000
2015 Total Supply 577,340,000
*Note: 2014 Total Supply is estimated to have been approximately 638 million pounds (inshell basis)
While the proposed industry marketing order will not change how the USDA collects or tabulates its data, it will give the Pecan industry more clout when it comes to negotiating critically needed changes in how the USDA does so. Subjective estimates, provided by segments of the industry with vested interests in their outcome, need to be replaced with objectively collected, statistically repeatable data. Until that is done, any figures coming out of the USDA will continue to be looked at with a jaundiced eye.
Finally, late last week there was a severe hail storm that impacted some of the orchards in West Texas and New Mexico. While some orchards experienced extensive damage, many experienced little to none. While some traders have indicated significant losses, early indications from the farms we deal with indicate that there was a loss of at least 6 million pounds (inshell basis) to a high of 10 to 15 million pounds. Unless the actual numbers turn out to be significantly larger, we do not feel that the loss will have a dramatic impact of pricing.
In the meantime, Sheller’s and Grower’s alike need to take a deep breath before jumping into a potential catastrophe.