The Data Doesn't Seem to Justify the Current Pecan Market Feeding Frenzy
December 09, 2016
For those of have been scratching their heads as to the current condition of the pecan market, you are not alone. With current market prices at or near record levels, and what appears to be a feeding frenzy going on in the orchards, both the Growers and the Shellers need to take a step back to consider where this market is headed. While much of the current buying frenzy can be directly attributed to the late harvest in the Southeastern US, the lack of adequate salable inventory in the September 30 year-end cold storage holdings and the early timing of the Chinese New Year, based on currently available data, there are still enough pecans to handle projected consumption. Why?
- Except for Macadamias, pecans are the highest priced nut.
- Walnuts continue to trade at $4/lb or more below pecans. Almonds are trading at over $3/lb below pecans.
- Several major US retailers are already reporting a 30 to 40% reduction in pecan sales.
- US Consumption dropped 10% last year, a year where pecans were competitively priced for the first six months of the year. That will not be the case this year.
- Based on current market prices, and historical data, pecan consumption could drop another 15% (approximately 69 million pounds).
Assuming that China will purchase approximately 90 million pounds of US pecans, that the October USDA estimate is correct and that Mexico will ship approximately 170 million pounds (NET) across the border, the supply situation shapes up as follows:
2016 Carry-In 129,097,400
2016 US Crop (USDA est.) 262,700,000
Mexican Imports (estimate) 170,000,000
Total (estimate) 561,797,400
Reduced Consumption (estimate) 410,000,000
2017 Carry-In (estimate) 151,797,400
Several years ago, the US Shelling Industry learned that they could make money without running their plants at full capacity. Nothing has changed that. Even publicly traded companies, and the deep pockets they bring into the industry, need to remember that markets are bigger than any company. While it is certainly possible that the crop could be significantly smaller than originally forecast, based on the above figures, is the current purchasing frenzy really justified?