USDA Releases the September Cold Storge Figures

October 31, 2013

Today’s delayed release of the September USDA Cold Storage holdings shows an industry inventory just shy of 181.5 million pounds (inshell basis). When added to the US Crop projections, as well as what is expected to come in from Mexico, the 2013 supply situation shapes up as follows:

2012 Carry Out (estimate)                                           181,485,280

2013 US Crop (Average of Sheller/Grower estimates) 214,233,000

2013 Mexican Imports (estimate)*                              135,000,000

2013 Total Supply (estimate)                                       530,718,280

*Note: This is a gross figure and does not take into account product that will be sent to Mexico, shelled and returned for further processing and sale; product that is ‘double counted’ by FAS.

Based on the above figures, and considering that 2012 crop year consumption (gross figure) was approximately 467.8 million pounds (inshell basis), should pecan prices remain at or near current levels, there should be enough pecans to handle projected consumption while leaving a reasonable carryout going into the 2014 crop.

As for new crop prices, due to the late start of the harvest, it is still too early to say where prices will end up. However, the following factors will have a significant impact on what happens in the weeks ahead;

1.      The actual size of the US crop

2.      Chinese inshell purchases

3.      The willingness of the Mexican Shellers to continue selling meats into the US market below current market levels.

With no government crop estimate, the actual size of the crop will continue to be debated.  However, once the harvest gets underway in earnest across the entire pecan belt, production yields per acre should help to give the market some direction.

As always, China will play a significant role in long term pricing.  However, unlike the past few years where China came into the new crop with little or no inventory, the same is not true this year.  China purchased just under 100 million pounds from the US last year; 40 million pounds more than normal.  Further, they purchased the bulk of the South African crop this past summer and have been active buyers in Mexico while waiting for the US harvest to begin.  With an early New Year and a late crop in Georgia, they may not be able to purchase enough early product out of the US to have a significant adverse impact on long term prices. While early sales to China were at relatively high levels, much higher than current shelled/meat equivalent pricing, Chinese traders are now becoming a little more selective as to what they are willing to pay.

As for Mexico, in addition to supplying the bulk of China’s early inshell requirements, they continue to ship large quantities of shelled meats to the US. Since August 1st, Mexican Shellers have shipped 12 million pounds of meats to the US; 4.1 million pounds alone in October. This has been a key factor in the meat market’s current price stability.

As usual, should you have any questions, please do not hesitate to contact me at 630-879-5200.