USDA Reduces 2022 Crop Estimate, Imports Continue to Lag

In the past week, the USDA has released two sets of numbers that shed a little more light on the pecan market.  On January 19^th, USDA NASS released their preliminary 2022 crop year pecan production report forecasting a slightly smaller crop than projected in December.  At 275 million pounds (inshell basis), the crop is forecast to be approximately 8% larger than the 2021 crop.  However, overall supply is down 11.2% over the same period and 13.4% over 2020’s record supply. 

The second set of figures was released on January 25^th.  Cold Storage levels, which had been lagging behind 2021 levels, climbed to slightly over 150 million pounds.  While only slightly higher than the same period last year, the 34-million pound jump is reflective of both the drop in consumption over the same period, and the hesitancy on the part of shellers to purchase inventory without having a contract to apply it to.  Based on currently available information, the supply situation shapes up as follows:

Note: Total supply indicates product available to US marketers and does not include pecans from other pecan producing countries. 2022 Mexican Import figures are NFF estimates based on currently available USDA NASS & FAS data. 

Unlike the almond and walnut industries which are hemorrhaging money due to oversupply (and a lack of buyers), as illustrated above, the pecan industry has a shortage. However, for the past several months, pecan prices have borne no relationship to supply. So, if there is a shortage of pecans, why have prices been so anemic?  There are many reasons, the least of which include high inflation, high interest rates, high fuel costs, the war in Ukraine and trade issues with China.  Consumers, struggling to make ends meet, have pulled back on their discretionary spending (Do I spend $5 for a dozen eggs or a pound of pecans?).  This is evidenced by the fact that US pecan exports were down last year by 26%.  Then there is the way the industry finances its inventory.  Because inventory purchases are still primarily done on a cash basis, where the sheller must assume the market risk, many shellers were hesitant to buy without knowing if the product could be sold. Further, major buyers, having witnessed a decrease in consumer discretionary spending, cut back on their purchases. It wasn’t until just recently, where the Chinese stepped back into the market, and prices suddenly firmed, that buyers were a little less hesitant to book long term contracts.

Imports are also down.  Continuing a trend that started last summer, Mexican imports are down approximately 17%. Why is this important?  Because eventually the market will adjust to the supply situation. Markets are bigger than any government, company or individual, and as I have said on numerous occasions, the remedy for low prices is low prices.  The industry desperately needs to change how they finance their inventory.  Panic selling, recriminations, accusations, etc., will not solve the problem.  Open dialogue, frank discussions and a realization that the industry can no longer afford to do business as usual, will.