From the 'Hen' House - USDA Revised 2018 Pecan Crop Figures and their Impact on the Market
March 28, 2019
There continues to be a lively conversation within the industry relative to total supply and consumption. The recently revised USDA/NASS 2018 crop estimate did not seem to help much. Due to weather related losses, they reduced their October estimate from 278.9 to 221.2 million pounds (inshell basis). Using their estimate, as well as currently available industry crop data, the supply situation shapes-up as follows:
2018 Carry-In (50% conversion rate) 162,653,000
2018 USDA NASS Estimate 221,200,000
2018 Net Mexican Imports (NPSA estimate) 260,000,000
2018 Total (Net estimate) 643,853,000*
*Note: 2017 Net Total Supply was approximately 640 million pounds (50% meat to inshell conversion rate).
Some may wish to question the above figures primarily due to the large Mexican import figure. The NPSA came up with this figure based on the following data. Through March 21st, Mexico has shipped 215.7 million pounds of pecans across the border (inshell basis); 57.7 million pounds more than the same time a year ago. According to USDA/FAS data, by July 31, 2018, the end of the 2017 export year, Mexico had exported 253.3 million pounds to the US; approximately 205.8 million pounds net. Assuming Mexican exports continue at the current rate, net exports should be around 260 million pounds.
Then there is the tariff on US inshell headed to China. While China purchased 80 million pounds from the US in both of the prior two crop years, barring immediate relief from the trade sanctions, 2018 crop year exports to China are projected to be less than 20 million pounds resulting in a net increase in available sellable supply of almost 118 million pounds. This is the primary reason for current prices.
So, is there any good news? Yes! For the first time since May 2018, Cold Storage levels are below those of a year ago. Considering that the industry was carrying almost 29 million more pounds than a year ago back in November, this is very encouraging. Overall, kernel shipments are up, both domestically and internationally with overall US consumption appearing to be up approximately 5.2%. Further, the consumer still has not seen the full impact of the lower prices. That probably won’t happen until later this Spring. Should the US and China settle their trade dispute before mid-summer, the combination of lower prices and pent-up Chinese demand could point to a very good Fall. As I have often noted, ‘The cure for high prices is high prices.’ The converse is also true.
 Available sellable supply does not refer to an increase in the above total supply figure. It is only an estimate of how much more there is available for sale in that total.