US Pecan Sheller's Find New Ways to Lose Money

December 12, 2018

While kernel prices seem to have stabilized over the past few weeks, the pecan market continues to be soft.  Even with the weather-related losses (i.e. Hurricane Michael, heavy rains, etc.), there appears to be plenty of pecans, particularly pieces. As such, the price differential between pieces and halves continues to grow.  Based on the results of a recently completed contract auction for a major kernel contract, the spread is now over $1.00/lb.  For some reason, unlike other nuts, pecan Sheller’s don’t seem to understand that it costs more to produce pieces than halves. When one considers that the US Shelling industry has lost somewhere in the neighborhood of $200 million over the past three years and will need to write-down the 2018 carry-over by another $30 to $40 million, it is difficult to understand why they would squander a rare opportunity to make some money and price their product based on cost and not emotion. Go figure.

Anyway, Mexico continues to ship a record number of pecans into the US.  As of December 10th, over 111.9 million pounds, inshell basis, has crossed the border; 47.9% more than the same period a year ago.  Further, shipments are still ahead of 2016’s record shipments.  While there have been some quality concerns, without Mexico, the US Shelling industry would be unable to supply a growing kernel market.

Exports continue to be a bright spot. Even without China, exports are up 9.8%.  China even purchased a small amount of inshell in October.  According to recently released American Pecan Council data, 2.2 million pounds were shipped to Hong Kong.

Finally, while final figures are still not available, it would appear that between Hurricane Michael and the rains that soaked Texas, Louisiana, Arkansas and Oklahoma, the industry lost between 70 and 80 million pounds of nuts.  Imagine the fun the Sheller’s would have had trying to figure out how to lose money on those nuts had they been available.