US Domestic Consumtion, As Well As Kernel Exports, Projected to Reach New Highs

July 24, 2019

*** Note: The original newsletter had three graphs embedded in the text of the document.  Those graphs can be downloaded from the 'Market Conditions' drop-down tab on the Pecan Crop Statistics page.

Being somewhat of an optimist, I always try to find the silver lining in a storm cloud.  To me, the glass is always ‘half-full,’ Not usually one to shy away from controversy, let me state that Monday’s release of the June Cold Storage holdings was positive.  Yes, kernel inventory is at a record level for any June in history.  Yes, inshell inventory is the second highest for a June ever.  Yes, based on currently available data, the industry is probably going to carry-out somewhere around 200 million pounds of pecans (inshell basis).  So, what could be positive?  CONSUMPTION; specifically, US Domestic consumption and kernel exports.  Based on currently available data, US Domestic consumption is on track to set a record.  Further, export shipments of kernels could also set a record.  

Much of the increase in the cold storage figures can be attributed to Mexico’s record shipments to the US.  Through July 21st, Mexico had shipped over 288.2 million pounds (inshell basis) to the US. With two weeks left in the USDA FAS export year, the final number should easily top 290 million pounds.  Based on information published on the Mexican Agricultural Information Services website, that means that over 79% of the 2018 Mexican crop was marketed and/or processed in the US.

While weaker prices have played a key role in both the increase in US and overseas kernel consumption, the shift from US to South African inshell by China has also been a factor.  Since 2012, China has continued to shift its inshell purchases from the US to South Africa.  Even without the impact of the current trade war, China has continued to rely more on the South African crop, as well as their growing domestic production, to satisfy their stagnant appetite for inshell pecans.  This makes the American Pecan Council (APC)/US Pecan Grower Council (USPGC) effort to open new overseas markets even more critical.  

Looking at the glass being half-full, the current supply situation should lead to another year of stable prices.  Stable prices should lead to more pecans being added to more products.  As such, it is less likely that successful products will be pulled from the shelves once prices do start to firm. Based on currently available data, world supply shapes up as follows:

2019 Carry-in (NFF estimate)                                             195,000,000

2019 US Crop (Average Tri-State/TX estimates)             261,500,000     

2019 Mexican Crop (NFF estimate)                                  322,000,000

2019 S. African Crop (NFF estimate)                                  35,000,000

2019 Australian Crop (NFF estimate)                                    6,000,000

Total Supply                                                                          819,500,000*

*Note: Figures do not include production in China, Argentina or Peru.  2018 world supply was approximately 816 million pounds.

Finally, since June 28, 2017, all pecan crop data collected and published by the USDA NASS has been based on only eight of the sixteen pecan producing states. While there are several reasons for their decision, most of which involve funding for the surveys and/or the their inability to get sufficient survey responses, the crux of their decision was based on the presumption that the eight states being excluded only accounted for ten percent of total production.  Unfortunately, USDA NASS has now decided that data from California, Louisiana and Alabama are not significant enough to be included either.  As a result, beginning with the October crop estimate, only FIVE of the sixteen producing states will now be surveyed and included in their reports. From a statistical standpoint, that means that 15-20% of US production will no longer be included in USDA NASS reports.  This decision was made devoid of any conversations with the pecan industry in general or the American Pecan Council in particular.   The decision was made without taking into consideration production trends, weather impact of recent crops, etc. or the concerns raised by the American Pecan Council when it was learned that these states would be excluded.   This is not something new for the USDA.  Since the APC has been publishing its data, there have been significant differences in export data as well, Yet, when shown hard data indicating that the FAS data has been less than accurate, the USDA’s silence has been deafening. While our industry does not have the financial or political power of our sister nut industries and their marketing boards, that should not mean that we should get inferior service.  While I can understand their decision, it is our tax dollars that fund the USDA.  The APC should have been consulted before any such decision was made.  The pecan industry should not be treated as a second-class citizen, and as an industry, we should let them know that.