The Pecan Industry Can No Longer Afford to Act as the Banker to the Big Chains

June 25, 2024

Today’s release of the May Cold Storage figures was not very reassuring. While inventories remain low, this was the fourth month in a row of inventory increases. With the continued wars in Ukraine and the Middle East, high interest rates and a fairly good crop in South Africa, it could be several months before buyers feel the need to re-enter the market in any meaningful fashion. Even with a severe drought in Mexico, and forecasts for a worsening situation in the months ahead, kernel prices continue to be lethargic at best.

The first unofficial crop estimate of the season was of little help. This past Friday, the Tri-State Growers (Louisiana, Arkansas and Mississippi) concluded their annual meeting with their estimate of the 2024 US crop. Based on their survey, the industry can expect a crop of 305.5 million pounds; basically no change from last year’s 306.75 million pounds. Not unlike the period between 1987 and 1990, should the current estimate hold up, this will be the fourth year in a row in which the industry can expect to experience stagnant growth and inadequate prices to cover costs. The late 80’s saw the greatest realignment in the history of the industry, both in the size and number of shellers and growers who went out of business or changed hands. While there are a number of reasons why history appears to be repeating itself, the biggest has to do with the way the industry finances its inventory. Shellers cannot afford to pay cash! The industry needs to develop other ways to share the risks.

The second problem has to do with the way in which the product is sold. Without any regard for the costs associated with supplying high quality pecans, the big buyers/box chains require 60, 90 and 120 day payment terms thereby financing their multi-billion dollar operations on the backs of an industry that can ill-afford to do so. They claim to want quality and service, but in reality, everything comes down to price and their own cost savings. Because US Antitrust law prohibits pecan companies from banding together to try and halt this usurious practice, there is little they can do. However, those same laws do not apply to growers. Unless, and until, there is a significant change in how the industry deals with the large corporate buyers, it will be difficult to avoid a repeat of the past.