February Pecan Cold Storage Holdings Spike to Historical Highs
March 27, 2020
For the second month in a row, we have seen significant increases in the Cold Storage figures. While there is some concern that the increase could be related to the COVID-19 virus, that does not explain the January jump. Further, annual shipments to China, Korea and Japan are considerably lower than the January increase alone. The February increase, and resultant inventory figure, are the largest in the history of the pecan industry, not just for the month of February but for any month ever. Yes, the virus could be part of the cause, but again, only part of the cause.
So, what is going on? Unfortunately, there is no one answer. It is a combination of things. Here are just a few of the possibilities:
- Due to recent losses, two of the largest shellers in the industry have cut purchases dramatically, one closing its largest processing plant, the other moving its primary production from Mexico back to the US. That reduction not only left product on the market, it took millions of dollars out of the purchasing equation thereby forcing growers to search for other outlets; many simply putting their crop in cold storage.
- Anticipating that the tariff issue would be resolved, several growers put their product in cold storage hoping to get higher prices later in the year, either from China or from shellers who needed additional product.
- At least two major Mexican shellers have increased their storage capabilities in the US. While this in and of itself does not increase supply, it now becomes ‘visible’ to the USDA.
- The increase in inventory could also mean that both the US and Mexican crops are much larger than originally projected.
In the first three cases, this product would not show up on the APC monthly report as US Growers and foreign suppliers are not required to report their inventories to the Council. However, all are supposed to report to the USDA. Conversations with the USDA would seem to confirm the above. They too were surprised by the magnitude of the increase, and in an effort to ensure that the data was as accurate as possible, made several calls to those reporting inventory levels higher than their historical averages. In each case, the owner of the product confirmed that the numbers were correct.
On a positive note, kernel consumption continues to be strong. Although inshell inventories shot to record levels, kernel inventories did not even in the face of continued near-record imports from Mexico.
While it is still too early to know the full extant of the virus’ impact on consumption, let’s not forget that the virus will eventually dissipate. The other issues will not and should be addressed before they become long-term problems.