Pecan Exports to China Falter

June 19, 2013

Over the past 100 years, nothing has had a greater impact on the Pecan industry than the emergence of China as a trading partner. Since 2002, no country, no company, no natural event, no innovation has changed the Pecan industry more that China. In the process, Growers have seen the value of their harvest more than double thereby allowing them to improve their orchards, plant more trees, and for the first time, become an active participant in the marketing of their product.  On the other side of the spectrum, Sheller’s have had to adjust their buying strategies in the face of ever increasing prices and develop new ways of financing their inventory purchases all the while trying to continue to service an ingredient market in which the average consumer has seen their costs jump 100%.

For the past nine months, shipments to China have set new records. Between August 1, 2012 and April 30, 2013, China imported 98.7 million pounds of Pecans* (inshell basis); a fifty percent increase over the same period a year ago.  However, what stood out in the April FAS figures was that fact that the April numbers reflect less than a 2 million pound increase over March’s numbers.  While part of the explanation for the steep decline in shipments may be traced to the Chinese Government’s recent crackdown on traders trying to avoid paying the steep import taxes (That crackdown resulted in a 65% drop in Almond shipments during the month of March alone), the more likely scenario is that the Chinese have purchased enough Pecans for now. Since 2007, the Chinese have purchased an average of 59 million pounds per year from the US. Those purchases have been supplemented by additional purchases, when needed, from Mexico and South Africa. Last year China purchased between 85 and 90% of the South African crop; approximately 20 million pounds.  To date, they have purchased almost nothing from the current South African harvest.  As has been seen in prior large crop years, the Chinese traders are not adverse to buying large quantities of product while prices are low to help offset any possible price increases in the following year. Anticipating a more traditional off-year US crop, and it’s resulting higher field prices, the Chinese may have been hedging their bets.  If that is the case, those holding 2012 inshell in the hope of realizing significantly higher returns than what could have been realized just a few months ago, may be in for a bit of a surprise. So too could those growers hoping to see a return to the prices of two years ago.

It will take another month or two before any definitive conclusions can be made. Without a final 2012 crop figure from the USDA, those conclusions will not only be more difficult to make but will be subject to considerably more discussion. However, one thing does appear to be true.  Lower prices have helped stimulate consumption, both domestically and overseas.  As more retailers and ingredient users adjust their pricing to reflect their current inventory costs, consumption should continue to grow, especially in the face of higher Almond and Walnut prices. 

As usual, should you have any questions, please do not hesitate to contact me at 630-377-2628.

*Note: Figure includes shipments to China, Hong Kong and Vietnam