It's Time that US Growers Quit Blaming US Sheller's for Current Market Conditions
February 11, 2019
Let me start by asking a question. What do the following names have in common: Beatrice Foods, Consolidated Foods, Pet Milk, Nut Tree, Ace Pecan Company, Young Pecan Company, SNA, Gold Kist, Terri Lynn, Tracy Lucky, San Saba Pecan Company and Golden Peanut and Tree Nut? Answer: these are the names of the major US Shelling Companies that have either gone out of business or have had to move their shelling operations out of the southeast because they could not make money shelling southeastern pecans. This is not conjecture, this is fact. Why do I mention this? I do so because for the past two months, every time I’ve been in a meeting with US Growers, either myself, or the other Shellers in the room, have been asked the same question, “When are US Sheller’s going to support the US Grower?” The above list of Sheller’s would not have gone out of business, or had to move their plants, if they had not been supporting the US Grower. Yes, there were other reasons that contributed to the significant losses incurred by those companies, but the basic reason had to do with the price and financing of said inshell. Before you jump all over me, I fully understand that it costs more to grow pecans in the southeast than just about anywhere else in the world. Again, this is not hyperbole, but fact, one that will be confirmed in the next few weeks once the American Pecan Council approves and publishes its recently completed strategic plan. For those not familiar with the project, the Boston Consulting Group (BCG) was contracted to take a detailed look at the pecan industry, both domestically and internationally, evaluate growing and shelling costs, industry competitors, markets, etc., then evaluate said data and make recommendations as to how the industry might respond. For many in the industry, the data will be ‘eye-opening,’ For others, it will confirm what they have been saying for years. Bottom line, if the US pecan industry does not change how it is doing business, it will go out of business!
Why do I mention this? Not because I look forward to the negative blowback my comments will generate, but because it is time that the industry wake-up. The Sheller’s did not create the current situation. They did not plant pecans in Mexico, South Africa, Australia, China, Argentina, etc., etc., etc. They did not blindly divert over thirty percent of the US crop to one, politically and economically unstable customer and then sell that inshell at prices that bore no relationship to the rest of the world pecan market. They certainly did not impose tariffs on those exports. While this may sound like blasphemy, had it not been for the rains and hurricane Michael, prices would have been worse. Before those weather events, world supply was projected to be 900 million pounds; a historic record, while world consumption was running at less that 628 million pounds; a difference of approximately 272 million pounds! Higher inshell prices, and relatively flat demand, have forced the US Shelling industry to turn to a number of cost-cutting solutions. In the face of mounting losses, those have included new investment in technology, reductions in labor, the closing of inefficient or unprofitable plants, and yes, the purchase of shelled pecans from low cost producers. What the BCG data will show is that without an immediate increase in consumption, if the southeastern growers do not change how they are doing business, if they don’t find new ways to cut their costs, do not find new ways to work with shellers or market their own product, they will not be able to compete in the world market. Dr. Lenny Wells, in a recent blog post, correctly pointed out that it will take time for the American Pecan Council to increase consumption, and like the other nut industries that implemented marketing orders, it will be several years before we see the results of those efforts. In the meantime, its time to stop playing the ‘blame game’ and work together to seek solutions. Internal industry conflict, misinformation and disarray only helps our competitors.