We have finally made it to the point in time where the market should be stabilizing from a good flow of in-shell, China’s supposed exit and the gift packers meeting their procurement needs for their Fall trade. However, challenges from an overall 2013 domestic crop production coupled with an unreliable cold storage report has the industry in what seems like utter confusion.
As of today the crop has been coming in slow, but steady from a shellers perspective. Yields and quality have been reasonably good despite the challenges we faced in Georgia from rain, but purchasing in-shell Pecans at a marketable level with the goal of making a profit is proving difficult with sub-$4.00/lb. piece prices still floating around on the spot market. The question is, how much inventory at this level is available? The cold storage report dropped just north of 40M lbs. (CS 10-13) in October presenting a little more of a bullish attitude in the market place as both growers and shellers see the carry-over(lower priced inventory from ’12) depleting at a rate of more than double YOY for the past 10 years. Halves have been and will continue to be very bullish. Currently, high-priced new crop in-shell coupled with the low price piece market is driving halves up. Even with China’s somewhat weak involvement in the market this Fall and Mexico’s “large crop”, halves will most likely get above $6.00/lb. in December due to the shorter supply estimated to be as much as 150M lbs. off from ’12-’13. The million dollar question is how much supply do we have left to last us now from carry-over/’13 production and at what level will the farmer sell verse putting in cold storage? In the next couple of weeks farmers across the entire Southern US will be harvesting and we should have a very good idea as to where the market is headed for ’14 contracting.
If you would like a quote on Pecans, please do not hesitate to contact me on my email [email protected] or in my office 229-244-1321.
I recently read a report written by Karen Halliburton Barber at Rabobank laying out great specific data as well as summary’s to describe the state of the Pecan industry here in the US and how both international demand/supply have effected and will effect our industry in the future. The title of the report is “Riding the Growth Curve- Can U.S. Tree Nut Exports Continue to Defy Gravity?” and the main bullet point issues were:
The main two factors I read about in this report affecting the Pecan industry both now and in the future are China and South Africa. The report went on to say the following in reference to the affect of China and South Africa ,” The most striking case of increasing competition for the U.S. industry is the loss of market share for pecan exports to China in 2012 to South Africa’s growing industry, which provided a viable sourcing alternative for Chinese buyers facing record-high U.S. prices. South African pecan production more than doubled that year after a short crop in 2011, and it increased 44 percent between 2010 and 2012. The decline in U.S. pecan exports and subsequent crash of U.S. pecan prices delivered a wake-up call and a significant lesson for the entire U.S. tree nut industry’s dependence on China as its largest buyer, underscoring the importance of diversifying its customer base.”
“U.S. Pecan Industry Gets a Wake-Up Call From South Africa
Growth of the Chinese market over the past five years has transformed the U.S. pecan industry’s traditional domestic focus into an export-driven business, with nearly one-third of the U.S. crop exported to China, resulting in record-high prices for U.S. growers. However, U.S. producers became acutely aware of international competition when these high prices ultimately caused Chinese buyers to switch to South African pecans and the market for U.S. pecans crashed in 2012.
South Africa is positioned to be the next major global player for pecans, despite accounting for only 4 percent of world production compared to the U.S. at 60 percent and Mexico at 34 percent (see Figure 3). Australia also has a niche pecan industry and new pecan plantings have been increasing in South American countries such as Argentina, Chile, Peru, and Brazil. However, it will take another decade for production in those areas to come to fruition.
High Prices, Weather, and Competition Lead to Pecan Market Crash
The crash of the U.S. pecan market in terms of prices and export sales was due to a combination of factors, including high prices and competition from South Africa1. While the U.S. industry was well aware of escalating prices prior to the crash, errors in official U.S. export data for the 2010/11 pecan marketing year, estimated to be overstated by as much as 85 percent on average, hid the decline in exports. These errors have since been corrected.
U.S. pecan prices were driven up by both Chinese demand and extreme drought problems in the main growing regions of the southern U.S. in 2011 and 2012, which decreased production and yields. As a result, U.S. grower prices for in-shell pecans more than doubled between 2005 and 2011 to over USD 3/lb. Retail and wholesale prices for pecan meats also reached record levels.
High prices eventually led to a decline in core consumption of U.S. pecans by domestic and European food manufacturers and ultimately drove Chinese traders—the largest buyers of the world’s in-shell pecans—to diversify sourcing. As a result, U.S. grower prices of in-shell pecans and pecan meats dropped 50 percent between July 2011 and January 2013, reaching a four-year low and making pecans less expensive than walnuts for only the second time in over 30 years. Consequentially, U.S. walnuts—a close substitute for pecans—may also be facing increasing competition from pecans in China due to the unusually low prices, particularly in the ingredient segments of the market.
China intended to buy nearly all of South Africa’s pecans in 2011, but a poor harvest caused by bad weather forced the country’s traders to continue sourcing from the U.S. Yet, in 2012, China bought the majority of South Africa’s record crop of nearly 10,000 tonnes. Following South Africa’s latest harvest in May of 2013, China has again bought the bulk of South Africa’s crop, at prices lower than what they would have had to pay for U.S. pecans, despite the recent fall in U.S prices. This occurred mainly during August, in preparation for the Chinese Mid-Autumn Festival.
Despite Challenges, South Africa’s Growing Pecan Production Could More Than Triple by 2020
The pecan industry in South Africa has grown rapidly in recent years as plantings made over the past ten years are now starting to bear commercial output. South Africa’s overall pecan production is projected to more than triple to over 40,000 tonnes by 2020, according to the most recent World Congress of the International Nut and Dried Fruit Council (INC).
South Africa enjoys the market advantage of an earlier counter-cyclical harvest compared to the U.S. It also has a vast amount of low-cost land available for pecan production. New production is concentrated in desert areas in the north-central and northwestern part of the country, where they grow pecan varieties suitable for arid climates similar to those grown in the western part of the U.S. However, these are large, narrow pecans, and Chinese traders prefer the larger, plumper variety grown in Georgia, the largest producer of pecans in the U.S.
South Africa’s industry faces other challenges as well, including limited water resources, a lack of cold storage, increasing costs for electricity and skilled labor, and a shortage of proper hedging equipment to reduce the impact of alternate bearing production cycles2. Unresolved post-apartheid land redistribution issues are also affecting long-term agricultural investment. Although the South African government is not yet investing in the promotion of the pecan industry, this may change given the long-term economic development potential of its pecan exports.”
In summary of what Karen has stated above and from a $/Lb. stand point, in 2011 we saw Pecan prices reach $3.20/Lb. on in-shell to the US farmer and $10.00+/Lb. retail prices in supermarkets across the US and abroad to the consumer. In 2012 the US and South Africa produced huge crops allowing China to buy inventory much cheaper than the year before averaging in the neighborhood of $2.45/Lb. on in-shell to the US farmer and retail prices as low as $6.00-$7.00/Lb. retail to the US consumer (See ZA export below). As a result of the lower costs to the consumer for the 2012 crop year we have seen record consumption numbers from both a domestic and export stand point. The final 2012 export figures were published last month by the USDA Foreign Ag Statistics Service (FAS) and, as expected, exports were up dramatically.Overall exports climbed from 150.64 million pounds (inshell basis) to 200.62 million pounds; a new record. While exports to China accounted for 34.4 million pounds of the increase, exports to all of the other major pecan importing countries were up. Export shipments of shelled meats continued to rebound; up approximately 11%. (See attached cold storage) Cold storage
South Africa’s expansion in Pecans is undoubtedly an international market changer for the future with their current 2020 projection being 62M Lbs, however the US is expanding rapidly also (See ZA Projection below). Currently South Africa is estimated to have 44,500 Acres planted and is growing at a rate of +-5,000 Acres per year, while in the state of Georgia alone there is currently 140,000 bearing acres. In addition there is approximately 20,000 acres still to young to bear fruit and for the past two years +-7,000 acres annually have been planted in the state which produced a crop in 2012 estimated to be as large as 145M lbs. Besides the US and South Africa, Mexico is the only other major producer contributing to the world supply and they too are expected to have a larger supply in the future. For 2013 Mexico is currently projected to produce 163M lbs. throughout the country’s 6 producing states. Mexico has a huge number plantings that could potentially boost the country’s production to nearly double, but water issues make this very unlikely.
For 2013, the US Pecan crop is projected to be much smaller that last year with the estimate currently being anywhere from 200-225M lbs. (See attached crop projection)September 2013 NPSA Crop Forecast – Final. As a result of the shorter crop we have seen prices rise significantly over the past month and expect the market to only get stronger as harvest gets into full swing. The main two variables at the moment are China and overall supply. China supposedly has a good supply of inventory left over from the 2012 crop and has been somewhat resistant to higher in-shell prices. However, we do believe they will be very interested in high yielding, over-sized in-shell. The question is, how much will they be willing to pay, how much will they buy and what affect will it have on the kernel market? Mexico is projected to have as much as a 185M lb. crop and with carry-in still high it is hard to know how much these two supply’s will supplement the shorter crop.
If you have any questions about this report or would like more information, please do not hesitate to contact me on my email at [email protected] or in my office at 229-244-1321.
For the first time since 2008, it would appear that domestic consumption is up. Based on preliminary data, US domestic consumption has jumped from 238.2 million pounds a year ago to approximately 247.4 million pounds. Further, considering the high price of almonds, walnuts and pistachios, pecan consumption should continue to grow as more nut users switch from high priced alternatives back to pecans. The July Cold Storage Holdings indicate a disappearance of 34 million pounds (in-shell pounds); the largest July decline ever. While consumption continues to accelerate, barring a natural disaster, industry supplies should still be sufficient to keep prices very competitive in the months ahead; even with smaller than expected crops in Australia and South Africa. (See attached cold storage report)
Exports also continue to do well. While inshell shipments to China have ground to a halt, they should still reach the 100 million pound (inshell basis) level projected earlier in the crop year. Like the increases seen in the domestic shelled pecan market, overseas buyers continue to increase their purchases of shelled pecans. With a weak dollar and the tight supplies/higher prices of walnuts and almonds, June shipments of shelled pecans increased approximately 9% over the prior month and are up over 10% for the year. (see attached export report)
Finally, due to the US Government’s decision to discontinue the practice of collecting and publishing pecan crop production data, there will be a lot of confusion, as well as heated discussions, as to the actual size of the 2012 crop and the upcoming 2013 crop. Early sales of good quality low count high yielding improved variety in-shell would seem to indicate that the price gap between halves and pieces is not going to change much in the weeks ahead. Combined with a very small native crop, all sizes of pecan halves are going to be in short supply. Pieces, on the other hand, will continue to be a bargain. However, if current crop projections for the US and Mexico come to fruition, the days of sub-four dollar pieces could be coming to an end.. Shorter supply, as well as the need for the shelling industry to recoup some of their losses, should move prices higher. (see attached crop report)
For further information or questions, please contact Jeff Worn at 229-244-1321 or [email protected]
17 January 2012
Contributing Editor Stephanie Schupska
The pecan, a Georgia crop staple, packs a much higher antioxidant punch than its nut-cousin the almond. But what the little-known nut is high in is overshadowed by what it’s low in—research, marketing and consumer data.
With a four-year, $1.2 million grant from the U.S. Department of Agriculture, University of Georgia food scientist Ron Pegg and his team now have the funding to transform the pecan’s image from holiday baking ingredient to year-round powerhouse. Their goal is to give consumers more information on the nutrient-packed nut and provide pecan growers with long-term profitability by improving their production efficiency and productivity.
UGA will lead grant
With UGA as the lead, the National Institute of Food and Agriculture Specialty Crop Research Initiative grant also involves collaborators from Texas A&M and New Mexico State universities. Pegg’s research on pecans started with peanuts. As a food scientist in the
College of Agricultural and Environmental Sciences, his specialty is looking at the nutrients and bioactives—like vitamins, minerals, antioxidants, phytochemicals and blood pressure- and cholesterol-lowering components—that certain foods possess.
From 2007 to 2009, Pegg worked with Ron Eitenmiller, an emeritus food science professor at UGA, on a nutritional study that examined the health potentials of new peanut varieties. During that time, they were approached by pecan producer Jon Robison of the Georgia Pecan Growers Association to see if more could be learned about the pecan’s nutritional and health benefits. That led to a meeting with Hilton Segler, who was GPGA president at the time, and Duke Lane Jr. and Buddy Leger of the Georgia Agricultural Commodity Commission for Pecans.
Past research led to grant award
Funding from the commission helped Pegg generate the preliminary data on pecan bioactives, which led to the USDA award and four years to work on pecan improvement.
“In looking at pecans versus other tree nuts, pecans are the highest in antioxidant activity,” Pegg said. “We’re extending our research looking at
antioxidant activity, and we’re finding higher values than those listed in the USDA oxygen radical absorbance capacity database.”
Antioxidants may assist the body’s natural defense mechanisms as they keep in check the potentially harmful effects of free radicals, which, according to Pegg, are reactive oxygen and nitrogen species that the body produces from normal metabolism. Free radicals are also encountered in the environment.
Pecans may help prevent metabolic syndrome
A 2011 clinical study from Loma Linda University found that pecans could help reduce biomarkers associated with cardiovascular disease and possibly metabolic syndrome. Metabolic syndrome is the tendency of several conditions to occur together, including obesity, insulin resistance, diabetes or pre-diabetes, high blood pressure and high levels of fat in the blood. A qualified health claim from the U.S. Food and Drug Administration also says “scientific evidence suggests but does not prove that eating 1.5 ounces per day of most nuts [such as pecans], as part of a diet low in saturated fat and cholesterol may reduce the risk of heart disease,” which equates to between 18 and 20 pecan halves.
“Some consumers are very unaware of the nut’s benefit,” Pegg said. “There is a lot that they don’t know about pecans.”
What consumers do know is that they like them. Pecan exports to China have skyrocketed since 2004, from 5,455 tons when the nut was first introduced to 40,273 tons (about 80.5 million pounds) in 2009, according to the Texas Pecan Growers Association. Chinese eat pecans in many ways like Americans eat peanuts—street vendors soak them in flavoring solutions, roast them, crack them and sell them by the bagful, Pegg said. And now India is also showing interest in importing the nut.
Georgia is no. 1
Georgia is the highest pecan-producing state in the U.S., producing 75 million pounds in 2010, an off year of production for this alternate-bearing tree. Texas and New Mexico followed with 70 million pounds and 66 million pounds, respectively.
Pecan trees typically have a two-year cycle. They produce more nuts in odd years in Georgia than they do during even years. That, too, is something Pegg hopes his team can change through the project’s horticultural initiatives. A more consistent supply could lead to higher profits and more stable prices.
Pegg’s UGA grant collaborators include M. Lenny Wells, a UGA Cooperative Extension horticulture pecan specialist on the UGA Tifton campus. Wells and faculty at Texas A&M and New Mexico State universities will be running horticultural studies and developing outreach materials. Pegg and Philip Greenspan, an associate professor of pharmaceutical and biomedical sciences in the UGA College of Pharmacy, will be conducting pecan analytical and biological studies. John McKissick, an agricultural economist and professor emeritus in the UGA College of Agricultural and Environmental Sciences, and Sharon Kane, a food business development specialist with the UGA Center for Agribusiness and
Economic Development, will be examining both the production and marketing economics of pecans.
When USDA Assistant Agriculture Secretary Kathleen Merrigan announced Pegg had received the grant, he was in Gdansk, Poland, as an invited guest lecturer at the Gdansk University of Technology. During his two weeks of lectures on functional foods, nutraceuticals and foods for health, he fit in a little pecan promotion.
“I mentioned that pecans have the highest antioxidant levels of tree nuts, and one of the students asked me ‘what is a pecan?’” he said. “In Europe, they’re very familiar with hazelnuts and walnuts, but they haven’t heard of pecans.”
University of Georgia
National Public Radio (NPR) recently reported on the boom in pecan consumption in China. Read more about our role in the article below, entitled: “Georgia Farmers Hail China’s New Taste For Pecans.”
About 80 percent of the pecans eaten in the world are grown in the United States, and Georgia is the country’s top producer. In a place referred to as the Peach State, it’s the pecan farmers who are planting thousands of new trees. The farmers are trying to keep up with skyrocketing demand from more than 7,000 miles away, in China. Working in his pecan orchard in Fort Valley, Ga., south of Atlanta, farmer Trent Mason leans over and fiddles with the irrigation system.
It’s been an exceptionally dry spring and summer, and Mason is trying to keep his trees alive. On one side of the 2,000-acre orchard are 20-year-old trees covered in tiny nuts; on the other side are saplings, planted in January. “It’s like a little baby. You can see they’re already irrigated, so if they weren’t, they wouldn’t be growing. You have to spray them. You have to put fertilizer. … We have a herbicide strip already established here, so the weeds aren’t competing with the tree,” he says. “And all of that costs money.” Right now, it’s money well spent. In the past three years, pecan prices have doubled.
The Chinese began buying pecans in 2004. Consumption skyrocketed three years later, thanks to a global walnut shortage and a record pecan harvest. Since then, consumption has more than doubled. Grower Randy Hudson was one of the first to export to China, back in 1999. Back then, the Chinese had no word for pecan. “They actually called it shan he tao, which was the word for being a soft-shelled hickory,” he says. Now the nut has its own name: “pecan guo.” “They’ll roast the pecans. They’ll crack them, and then they’ll put them into a brine solution to salt-roast them in the shell as the nut is heated,” Hudson says, “kind of a lot like salt-roasting in-the-shell peanuts.”
For years, most pecans were sold domestically, while almond and walnut growers marketed their commodities overseas. Now pecan growers are catching up and expanding into other parts of Asia. Jeff Worn of the South Georgia Pecan Co. just traveled to India, where he served pecans at a food show. “If somebody tried to bring pecan curry over here, how do you think it’s going to go over? Probably not very well,” he says. “So, you’ve got to be accustomed to their environment. And we were cooking pecans with rice and things like this at the booth, and bell pepper, and kind of like a saute-type deal. And people really ate it up.”
Hilton Segler, executive director of the National Pecan Growers Council, says that with India’s burgeoning middle class, it could prove to be a stronger market than China. “Three years from now, we’ll probably be moving as many pecans, if we can produce them, in India,” Segler says. “There are 1.3 billion people in China. There are 1.1 billion people in India.” Segler says right now pecans are a great investment and more consistent than the stock market.
Mason says it’s about time, because for years farmers just broke even. Between 1960 and 2000, pecan prices remained low. “I remember Dad saying you could get a Coke and a MoonPie for 25 cents,” he says. “And now, a Coca-Cola is $2 and a MoonPie is, what, 50 cents? So, that’s $2.50. That’s a lot of increase when we were staying the same for a while.” Mason says it’s going to take growers time to catch up with demand. His new trees won’t produce nuts he can sell for about a decade.