Tri-State Growers Forecast 292 Million Pound 2017 Pecan Crop as Consumption Continues to be Stronger than Expected
June 23, 2017
The past few weeks have been full of good news for the pecan industry. Overall exports are up, overall exports to China are up, meat sales to China are up, and even with high pecan prices, overall pecan shipments continue to be good. Further, while domestic consumption is still down 10.9% since 2015, it is only down 2% over the same period a year ago. With walnut prices continuing to firm due to a tighter than expected supply, the consumption pendulum appears to be swinging back toward pecans. Higher than anticipated imports from Mexico have helped to offset China’s new appetite for shelled meats, helped to move prices towards more competitive levels and afforded the shelling industry the opportunity to service a domestic market that has continued to suffer due to a lack of adequate supply.
Mexico continues to ship pecans to the US at a feverish pace. As of June 20th, Mexico had shipped 221.6 million pounds of pecans to the US; another record. With inshell shipments from the US to Mexico down 55%, that equates to a NET increase of 46 million pounds (inshell basis) over the same period a year ago.
Based on the May Cold Storage figures, the industry has not only been able to absorb the additional imports, it has been able to continue to reduce both its inshell and meat inventories. In January, the industry was carrying almost 26 million more pounds (inshell basis) than a year earlier. As of May 31, that figure has shrunk to approximately 6 million pounds. Based on May’s figures, it would appear that the industry could still carry-out approximately 150 million pounds. However, should consumption continue at its current pace, carry-out could end up at about the same level as last year.
The export market continues to be a surprise. Overall exports are up 24.9% with China accounting for the bulk of the increase. Based on April export figures, inshell exports to China are up 24% over the same period last year. However, meat exports are up 9.4 million pounds; a 557% increase. Due to increased labor costs in China, and the higher than normal price of inshell pecans, it has become more cost effective to import meats for the burgeoning ingredient market. Higher walnut prices have also contributed to the increase in pecan shipments.
The industry also received the first of several 2017 pecan crop estimates. The Tri-State Growers closed their annual meeting today with Ben Littlepage’s annual estimate of the upcoming crop. Based on currently available information, this is how the 2017 supply situation shapes up:
2017 Carry-In (estimate) 150,000,000
2017 US Crop (Tri-State Estimate) 292,000,000
Mexican Imports (estimate) 200,000,000
Total (estimate) 642,000,000*
*Note: 2016 Total Supply was approximately 613.3 million pounds
Finally, because of the amount of time it takes to develop and carry out marketing plans, new product development, etc., most major ingredient users can tolerate a spike in prices for a year, assuming that prices return to normal levels within twelve to eighteen months. However, when prices remain unusually high for longer periods of time, most companies will cancel new product development, curtail marketing programs, cut-back on purchases and search for cheaper alternatives. Thanks to China, the pecan industry may have dodged a bullet this year. However, it is unlikely that current consumption levels can be maintained if prices continue at or near current levels. With walnut, pistachio and almond prices headed higher, the pecan industry could be presented with a great opportunity. Based on current supply figures, the pecan market is still overpriced. Allowing the market to seek more reasonable levels this fall can only help to increase consumption, market share and profitability.