Pecan Prices Approach Record Levels

December 22, 2015

The USDA released their November Cold Storage figures today, and while pecan consumption continued at a healthy pace through November, that is certain to change in the months ahead. With walnuts now trading at almost $4.00 per pound less than pecans, major retailers are just now beginning to adjust their walnut prices to reflect current market conditions. That will change after the first of the year when retailers can be expected to more aggressively reflect those costs in an effort to spur sales during the slowest sales period of the year. Whereas pecans have been one of the best values over the past three years, the industry can expect walnuts to take back much of what they lost to pecans in both the retail and bakery segments. In an effort to push sales for an industry experiencing record inventories, the Walnut Marketing Board has launched a plethora of print and television ads touting the health benefits of walnuts. Further, walnuts will not be the only nut that will bite into pecan consumption as only pistachios and macadamias are currently priced higher than pecans.

As for the harvest, weather conditions throughout the growing region continue to create problems with both the size and quality of the crop.  With only a few weeks remaining, no one is expecting the crop to come in larger than the October USDA estimate.  Heavy rains and flooding washed away a good portion of the native crop, and with much of the early harvest in the Southeast either going to China or to complete 2014/2015 contracts that could not be shipped this past summer, several major Shellers are now faced with the possibility of being unable to secure enough inventory to cover even their core customers.

As for prices, the combination of a smaller than anticipated crop, and the deep pockets of several new entrants into the shelling industry, have caused field prices to approach the record levels of 2011. As has been predicted for the past several months, the shortage of pieces will continue well into 2016.  Pieces are now selling at or just under the pricing of most halves.  If not for the nuts coming across the border from Mexico, meat prices would already be well above the highs of 2010 and 2011.  While current imports are running about 4% less the same period a year ago, through December 21st, Mexico has shipped over 103 million pounds (inshell basis) into the US.

China’s weaker than anticipated economy, the stronger dollar overseas and cheaper nut alternatives are going to have an adverse impact on pecan consumption.  As the almond industry has painfully learned, that combination can turn an anticipated short supply into an oversupply situation within a matter of months.  Since their harvest began, almond prices have dropped approximately 25%.  For some items, the drop has been even greater.  Because the US Pecan Shelling industry must pay cash for their inventory, this is not a year to carry any unsold inventory.