While Consumption Continues to Increase, the Industry Still Faces an Over-Supply Situation

May 15, 2019

With the release of the March American Pecan Council (APC) data, and contrary to what some have recently reported, the industry continues to find itself in an oversupply situation. Fifty-two percent of the total supply is still without a home. Based on the APC data, 40.1% of the inventory currently held by the handlers is still ‘uncommitted.’  While those figures are expected to change as growers with inventory move it into the market, assuming average shipments over the next several months, the industry could close the year with a record carry-out.  Without a resolution to the tariff issue, a significant increase in consumption or considerably smaller crops in both Mexico and the US, pricing may not change dramatically this fall.  While that may be good for consumption and new market development, it will not help the financial position of growers and shellers who are still reeling from last year’s ‘perfect storm.’  Based on currently available data, this is how the supply situation shapes up (figures are rounded):

2018 Carry-in                                                           162,653,000

US Crop (USDA estimate)                                       221,200,000

Mexican Imports (NFF estimate)                          276,827,000

Total                                                                           660,680,000

Less product shipped (APC data)                          150,883,000

Less product committed (APC data)                     166,234,000

Product available for sale                                       343,563,000

Less six months of average shipments*              133,610,000

Potential 2018 Carry-Out                                       211,953,000

*NFF Estimate based on average shipments between March and September over the past ten years assuming a 50% meat to inshell conversion rate.

As has been the case for most of the crop year, Mexico continues to ship record volumes of pecans across the border; 28.5% more than last year at the same time.  Through May 12, 2019, Mexico has shipped over 245 million pounds (inshell basis) across the border. Should shipments continue at their current pace, last year’s record shipments of 253.3 million pounds will be eclipsed sometime in June. While halves have become harder to come by, as well as the inshell that will product good quality halves, piece prices continue to be an anchor on the industry.

Having just returned from South Africa, I was privileged to be able to address a group of 150-plus South African growers on current market conditions, world supply and the impact of the trade tariffs on not only the US Pecan Industry, but on world pricing and demand.  While their early varieties were just beginning to be harvested, most growers were optimistic about the potential for better pricing from the Chinese on what will be a slightly larger 2019 crop.  Weather, particularly drought during the early stages of the crop and heavy rains and hail over the past few months, has left the South Africans projecting a crop of approximately 19,000 metric tons (approximately 41.9 million pounds).   Barring unforeseen natural disasters over the next 12 months, the lighter than expected crop this year could allow South Africa to harvest a 2020 crop of well over 50 million pounds. A copy of my presentation can be downloaded from my website, www.nffonline.com.

Finally, as has been the case since the APC began publishing their monthly statistics, there continues to be a significant disconnect between the APC and USDA FAS data especially when it comes to shipments destined for China.  Inquiries to FAS usually result in a statement to the effect that FAS only publishes what the Department of Commerce, Census division, sends them.  To date, the Department of Commerce has been less than enthusiastic about addressing the inconsistencies.  It is time for a face-to-face meeting between our industry and the Department of Commerce.  The APC data is coming from Handlers that are required to submit it, and month after month, the APC is reporting greater shipment volumes than what FAS is publishing.  That cannot be the case! While there are much larger issues that face our industry, good data was one of the reasons for establishing the APC.  If the Department of Commerce is too lazy to verify the information they publish, maybe they should start publishing the APC data.  It at least can be verified.