COMMODITY REPORT - PECANS
TABLE OF CONTENTS
GENERAL OVERVIEW...... 3
GLOBAL PRODUCTION SCENARIO...... 4
U.S. PECAN PRODUCTION SCENARIO
U.S. PECAN PRODUCTION BY STATE...... 7
U.S. PECAN EXPORT OVERVIEW
U.S. PECAN IMPORT OVERVIEW...... 11
U.S. PECAN CONSUMPTION SCENARIO
PECAN HARVEST......
PECAN PRODUCTION & ACREAGE...... 17
PECAN MARKETING...... 18
FACTORS DETERMINING THE PRICES FOR PECANS...... 19
U.S. PECAN PRICE TRENDS...... 19
LIST OF FIGURES
Figure 1: Major Pecan Producers in World...... 5
Figure 2: U.S. Pecan Production Trend...... 6
Figure 3: Pecan Producing States in U.S....... 8
Figure 4: U.S. Pecan Export Trend...... 10
Figure 5: U.S. Pecan Import Trend ...... 12
Figure 6: U.S. Pecan Production v/s Imports ...... 13
Figure 7: U.S. Pecan Per Capita Consumption...... 15
Figure 8: U.S. All Pecan Supply and Consumption ...... 16
Figure 9: Pecan Price Trend: 1980-2004...... 20
LIST OF TABLES
Table 1: World Pecans Production Trend...... 5
Table 2: Major Pecan Producing States in U.S...... 9
Table 3: Export of Pecans from US by Country of Destination...... 11
Table 4: Import of Pecans by US by Country of Destination...... 12
Table 5: Pecan Consumption Comparison ...... 15
Table 6: Pecan Growers Price Trend...... 21
GENERAL OVERVIEW
Pecan is the fruit of a hickory tree native to eastern and central North America and the river valleys of Mexico. The name “pecan” comes from the Algonquian word meaning “nut requiring a stone to crack”. The pecan nut is smooth and oval-shaped, with a thin, hard shell. Its rich kernel is golden brown on the outside and tan on the inside. The pecan is the only major nut tree indigenous to the United States.
Pecans are also the only native tree nuts grown for commercial use in the United States. The other majortree nuts have their origins in Asia, the Middle East,and Australia. The black walnut is also a nativeAmerican tree, however, its commercial production is very limited. Almost all the walnuts growncommercially in the United States are of the Englishwalnut variety, originating in Iran.
Pecan production also differs from the other domestictree nuts. Most of the other nuts are grown inconcentrated areas, with the greatest concentrationlocated in the Central Valley in California. Pecanproduction, on the other hand, is dispersed throughoutmany of the southern and southwestern States. Themajor production is from Georgia, Texas, and NewMexico. Other big producers include Arizona,Oklahoma, Alabama, and Louisiana. The United States Department of Agriculture's NationalAgricultural Statistics Service reports 14 States produce commercial pecan crops.
The pecan tree is native to the southwestern UnitedStates, along the Mississippi River up to Indiana andIllinois, and into Mexico. As a result, the UnitedStates ranks number one in the world in pecan production, with Mexican production ranking second,and growing. Chihuahua is Mexico’s leading producer, accounting for about 70 percent of thecountry’s crop. Smaller crops are also produced inAustralia, Brazil, Israel, Peru, and South Africa.
Pecan production in the United States is divided intotwo groups, trees that are classified as native/seedling varieties and improved varieties. The improvedvarieties of pecan trees have accounted for over three-quarters of national production over the past 3 years.
The native/seedling variety is self-setting or grownfrom seed into a seedling. These trees have not been grafted or budded as are many fruit and nut treestoday to obtain maximum production consistency and favorable attributes in the final product. Commercialvarieties have been improved through selectivebreeding and grafting. Because the improvedvarieties have been created using the best attributes ofthe tree, the nuts are larger and yields are higher. While both varieties are alternate bearing in nature,producing a large crop one year followed by a smallercrop the next year, native trees exhibit more alternatebearing patterns, often producing extreme shifts inproduction levels from year to year.
This nut is an important source of ellagic acid. Pecan nuts are a good low fat source of vitamin E and also have anti-cancer effects. They can also lead to lower cholesterol levels.
GLOBAL PRODUCTION SCENARIO
Worldwide pecan production (nuts) is concentrated in the USA and Mexico, accounting for almost 98% of the total world pecan production. USA is the major producer of pecans with an estimated 75 percent of the total world production, followed by Mexico, with about 20 percent and the remaining 5 percent are from small commercial plantings in several countries such as South Africa, Australia and Israel. Pecans account for about one-fourth of US total tree nut consumption. About 21,000 farms grow pecans in the United States.World pecan production is not showing a smooth trend and is more fluctuating in nature.
Figure 1: Major Pecan Producers in World (in short tons)
Source: Foreign Agricultural Service, Official USDA Estimates
Table 2: World Pecan Production Trend (in short tons)
Figures in short tons / 2002-03 / 2003-04 / 2004-05 / 2005-06 / 2006-07 / 2007-08 / 2008-09Beginning Stocks / 119,058 / 79,509 / 107,441 / 66,689 / 76,918 / 65,410 / 66,138
Production / 155,887 / 209,861 / 168,155 / 215,952 / 420,866 / 278,505 / 201,607
Imports / 62,280 / 97,620 / 132,042 / 124,053 / 142,962 / 127,134 / 142,197
Total Supply / 337,226 / 386,990 / 407,638 / 406,694 / 640,746 / 471,049 / 409,942
Exports / 73,259 / 86,418 / 92,633 / 98,987 / 97,282 / 79,359 / 121,253
Domestic Consumption / 184,458 / 193,131 / 248,316 / 230,789 / 478,053 / 325,552 / 211,528
Ending Stocks / 79,509 / 107,441 / 66,689 / 76,918 / 65,410 / 66,138 / 77,161
Total Distribution / 337,226 / 386,990 / 407,638 / 406,694 / 640,746 / 471,049 / 409,942
Source: Foreign Agricultural Service, Official USDA Estimates
US PECAN PRODUCTION SCENARIO
The United States leads the world in the production and export of tree nuts and produces more than one-third of the total world output of tree nuts.The United States is the world’s largest producer of pecans. Although exact numbers for world pecan production are not known, it is estimated that the United States produces 75 percent of total world production followed by Mexico with an estimated 20 percent. While cyclical, pecan production in the United States has remained fairly constant over the last 10 years with a 10-year average production of 252 million pounds per year. Improved varieties accounted for approximately 78 percent of total production and 86 percent of total value.
Unlike other tree nut production that is concentrated in geographical regions, U.S. pecan production is dispersed throughout the South and Southwest. There are 14 states that produce pecans commercially: Alabama, Arizona, Arkansas, California, Florida, Georgia, Kansas, Louisiana, Mississippi, New Mexico, North Carolina, Oklahoma, South Carolina and Texas. Improved varieties production is concentrated in Georgia, New Mexico, and Texas, and native seedling production is greatest in Texas, Oklahoma and Georgia.
Figure 2: US Pecan Production Trend (In short tons)
Source: Foreign Agricultural Service, Official USDA Estimates
U.S. Pecan Production by State
Georgia accounts for about a third of the U.S. pecanproduction during normal production years. In a year,such as 2002, where Georgia’s crop declined sharply as a result of adverse weather conditions and the offcycle of production, its share of the national total fellto 25 percent. Improved varieties account for morethan three-fourths of the State’s crop.
Texas is the second biggest pecan producer in theUnited States, followed closely by New Mexico.According to the US Census of Agriculture, Texas accounts for a third of all the pecan farms, acreage,and trees planted in the United States. In fact, Texas has almost twice the number of trees planted asGeorgia, the State with the second greatest number oftrees. While improved variety trees account for abouttwo-thirds of Texas’ production, the native/seedlingvarieties are still very prevalent in the State. There are many small growers, harvesting crops from small groves and even from backyard production.
New Mexico’s pecan production is new, relative toTexas, and all of its production is from improvedvarieties. While it accounts for only 6 percent of theacreage, it accounts for about 12 percent of the trees. New, improved varieties do not need as much spacebetween trees and can be more closely planted than the native varieties. As such, fewer acres are neededto produce a crop comparable in size to the biggerStates. New Mexico’s production nowaccounts for about a fifth of the national total.
Oklahoma has the third greatest number of farms and acreage planted to pecans. Its production, however,ranks about fifth place because its crop is heavilyreliant on native/seedling varieties.
Figure 3: Pecan Producing States in US
Source: IndianaUniversity Libraries, with data from 2002 census of agriculture
Table 2: Major Pecan Producing States in US (in short tons)
State/Yr / 2006 / 2007 / 2008AL / 3,000 / 5,000 / 3500
AZ / 7,000 / 11,500 / 7750
AR / 1,100 / 1,150 / 500
CA / 1,700 / 2,200 / 2000
FL / 250 / 950 / 850
GA / 21,000 / 75,000 / 32500
KS / 1,000 / 250 / 750
LA / 10,500 / 7,000 / 2500
MS / 1,250 / 1,500 / 650
MO / 550 / 3 / 480
NM / 23,500 / 37,000 / 22500
NC / 250 / 100 / 300
OK / 8,500 / 15,000 / 4000
SC / 550 / 1,000 / 1250
TX / 23,500 / 35,000 / 15000
US / 103,650 / 192,653 / 94530
Source: USDA National Agricultural Statistics Service
While alternate-bearing production is common for nut trees and pecans in particular, in recent years, the swings in the size of the annual pecan crop have grown more extreme. As a result, price swings have also increased. The increase in swings is largely due to improved variety trees planted in the early nineties becoming mature. Many growers, however, have not been doing the necessary pruning, partially due to reduced prices lowering the amount of inputs, including labor, into orchard management. Hence, both production and price have grown volatile in recent years. As a result of the strong production and price correlation that have become quite evident in recent years, end users have increasingly shifted their purchases to big crop years when prices will be lower. As a result, they have reduced purchases during the off years, which have been putting downward pressure on prices during those years when they would normally be higher. In response to this trend, many growers of native variety trees are putting less management time and inputs into their groves during the off season, which may affect production down the road. Growers of improved varieties need to continue their management practices if they are to benefit from planting improved varieties.
US PECAN EXPORT OVERVIEW
While the nineties saw a growth in imports of pecans into the United States, it was also a time when exports began to take off. While imports grew very rapidly in the seventies and eighties, the trend has slowed in recent years, with an average increase of 2 percent since the mid-nineties. Exports, on the other hand, have grown an average of 9 percent annually and show less variability from year to year. Similar to Mexico, U.S. shellers are likely selling their highest quality pecans overseas to get the highest prices and importing from Mexico to make up the difference as well as to reduce the valley and peaks in domestic supply.
Figure 4: U.S. Pecan Export Trend
Source: Foreign Agricultural Service, Official USDA Estimates
In 2008, the United States exported 66,138 short tons of shelled and unshelled pecans. Major U.S. export markets for shelled pecans include: Canada, China, Hong Kong, Mexico, Netherlands and the United Kingdom. Canada and Mexico dominate other countries in terms of U.S. exports, accounting for nearly 43 percent of all U.S. exports. Large pecan exports to Mexicoare a result, in part, of shipments to Mexican maquiladoras that shell the U.S. pecans and re-export them to the United States. It is estimated that up to one-half of pecans shipped to Mexico from the United States are shipped back to the United States after being shelled. Top export markets for U.S. pecans are shown in the following table.
Table 3: Export of Pecans from U.S. by Country of Destination
Country/Yr / 2000 / 2001 / 2002 / 2003 / 2004 / 2005 / 2006 / 2007Mexico / 2595 / 1820 / 8519.5 / 9886.5 / 16137 / 6476 / 20260.5 / 14801
Hong Kong / 5.5 / 3 / 1604 / 284.5 / 993 / 809 / 3418 / 11841
Canada / 4208.5 / 4168 / 3475.5 / 4696 / 5387.5 / 5575 / 4783 / 4561.5
The Netherlands / 1581.5 / 1573.5 / 1916.5 / 929 / 1291 / 1464.5 / 1969.5 / 2359
United Kingdom / 1997 / 1679.5 / 1494.5 / 1372 / 1769 / 2171.5 / 1619.5 / 1396.5
Vietnam / 0 / 0 / 0 / 4 / 6.5 / 0 / 82.5 / 914.5
Others / 2430.5 / 2346 / 2864.5 / 2219.5 / 2894.5 / 2756.5 / 2959.5 / 3415
World / 12817.5 / 11590 / 19874.5 / 19391 / 28478.5 / 19253 / 35092 / 39289
U.S.PECAN IMPORT OVERVIEW
Among tree nuts, pecan imports rank third behind coconut meat and cashews. The U.S. market has become increasingly reliant on pecan imports, almost all from Mexico, to fulfill supply needs. The U.S. imports pecans from Mexico during the harvest season and pecans are exported from storage to Mexico during the rest of the year. The net effect is that Mexican imports increase U.S. supplies by 70-80 million pounds, depending on price. Until the mid-eighties, the United States had been a net exporter of pecans; however, since then imports shot up, and have been increasing since the mid-nineties.
Mexican pecans are reported to be of high quality since much of what is exported is from improved variety trees. The lower humidity in Mexico’s production region, compared with Georgia and Texas, produces a light-color nut and high percentage of kernel to shell, commanding higher prices than growers would receive on the Mexican market. As a result, Mexico ships its best pecans to the United States, leaving the lower quality nuts for its domestic markets. If domestic supplies are low, imports of lower-quality pecans from the United States are brought in to make up the difference. Imports as a share of domestic supply have increased from less than 1 percent in the early seventies to an average of 14 percent during the past three marketing seasons. The growth in Mexico’s production, along with the volatility of the U.S. crop, and increased international demand for U.S. pecans, have all driven the rising imports.
Figure 5: US Pecan Import Trend (in short tons)
Source: Foreign Agricultural Service, Official USDA Estimates
Table 4: Import of Pecans by US by Country of Origination
Country/Yr / 2000 / 2001 / 2002 / 2003 / 2004 / 2005 / 2006 / 2007Mexico / 32,294 / 19,680 / 30,008 / 36,328 / 45,892 / 44,364 / 43,650 / 40,717
Australia / 123 / 1 / 78 / 67 / 813 / 350 / 370 / 320
United Kingdom / 0 / 0 / 0 / 0 / 0 / 0 / 20 / 80
South Africa / 0 / 70 / 207 / 88 / 89 / 774 / 16 / 77
Peru / 431 / 125 / 48 / 98 / 76 / 130 / 184 / 72
Others / 19 / 42 / 14 / 22 / 9 / 326 / 152 / 60
World / 32,866 / 19,917 / 30,355 / 36,602 / 46,877 / 45,943 / 44,390 / 41,326
Figure 6: U.S. Pecan Production v/s Imports (In short tons)
Source: Foreign Agricultural Service, Official USDA Estimates
US-MEXICO PECAN TRADE
Since 1992, Mexican imports of U.S. pecans havedecreased while exports have remained stable. Thiscan be attributed to new plantings by Mexican growers in the late 1980s and early 1990s in responseto high export prices in U.S. markets. Bearingpecan tree stocks in Mexico have increased by17 percent since 1993, while production has increased by 36%. Meanwhile Mexican imports oflower quality pecans from the United States havedecreased by 64% since 1993. This trend is expectedto continue as more nonbearing trees comeinto production. New production will likely be channeled toward exports first, whereas domesticconsumption gaps will be met with lower quality pecan imports from the United States.
Policy measures that may have affected net tradein pecans between the United States and Mexicoover the past decade include phytosanitary issues and the establishment of the North American FreeTrade Agreement (NAFTA). In 1991, Mexicobeganrequiring methyl bromide treatment of importedpecans. In 1994, concerned about possibleintroduction of the pecan weevil, Mexico banned imports of in-shell pecans from Alabama, Arkansas,Florida, Georgia, Louisiana, Mississippi, Oklahoma,South Carolinaand Tennessee. It also temporarilyrequested phytosanitary certificates for importscoming from New Mexico and Texas untilthese last two states were declared free from pecanweevil later that year.
The passage of NAFTA likely had little impact on trade since tariff rates were sufficiently low priorto NAFTA. United States’ tariff rates for in shellpecans from Mexico were set at 5 cents per pound and at 10 cents per pound for shelled pecans. AlthoughMexico had a higher duty rate of 20 centsper pound on U.S.imports, these were of lowerquality than Mexican pecans, and hence lower priced.
U.S. PECAN CONSUMPTION SCENARIO
Per capita pecan consumption averaged 0.48 pound annually since 2000, slightly greater than English walnut consumption but behind that of almonds. Pecan consumption has remained relatively stable over the past 30 years despite increased competition from other tree nuts due to the tremendous growth in almond and slower, but steady increase in walnut production. Domestic pistachio production was also introduced into the United States about 25 years ago and has grown rapidly. The movement towards increased production of improved, higher quality pecans has helped in maintaining consumption levels. Also, a big contributing factor is the traditional use of pecans in recipes during the fall and winter holidays, where substitutes are less acceptable.
Figure 7: US Pecan Per Capita Consumption
Source: Foreign Agricultural Service, Official USDA Estimates
Table 5: Pecan Consumption Comparison (in short tons)
Year / World consumption / US Consumption / Mexican consumption2000-01 / 191599.5814 / 161030.5978 / 30568.9836
2001-02 / 173698.2294 / 142062.2194 / 31636.01
2002-03 / 184457.7797 / 149955.7897 / 34501.99
2003-04 / 193130.6761 / 160020.891 / 33109.7851
2004-05 / 248316.2233 / 213846.2 / 34470.0233
2005-06 / 230788.551 / 195514.951 / 35273.6
2006-07 / 478053.1801 / 439498.033 / 38555.1471
2007-08 / 325552.1797 / 26357.0953 / 61981.2267
2008-09 / 211528.0631 / 147223.188 / 64304.8751
Source: Foreign Agricultural Service, Official USDA Estimates
Figure8: U.S. All Pecan Supply and Consumption (In short tons)
Source: Foreign Agricultural Service, Official USDA Estimates
PECAN HARVEST
Harvesting pecans in Texas is a very difficult and demanding task. Pecans should be harvested, cleaned, dried, sacked, and sold before December 7 each year to maintain kernel quality and obtain a good price. This short seven week harvest season may have at least 14 days of delay because of rain. Sometimes rain and cold occur, making the harvest even more difficult. Theft from man and animals, especially crows, can significantly reduce the crop size. Much of the Texas crop is harvested by machines such as trunk shakers, sweepers etc. Some pecans are harvested manually for cash sale to accumulators. Most of the Pecan crop sold during the first few months following the harvest, unlike other tree nuts, because of lack of storage facility. Level sales throughout the year could help stabilize and/or boost prices. But, growers sell their nuts, in-shell to accumulators, who act as brokers who sell the nuts to shellers and pay the growers a percentage on the final price. Shellers, in turn sell the processed nuts to end users like confectioners, ice cream makers etc. Industrial end users account for almost 90 percent of the market.
Pecans are processed immediately after harvest to obtain a good price, to prevent kernel darkening, embryo rot, vivipary, mycotoxins such as aflatoxin, and other problems related to moist pecans. Shucks not removed in the orchard by nature or the harvesting equipment are removed with dehulling equipment. In south Texas, where the harvest is begun before the shucks are fully open to prevent vivipary, the shucks must be ground off in water with special equipment. Once deshucked, poorly filled pecans are vacuum separated with a pop remover. The good pecans are dried from 15% moisture to only 4% as soon as possible using forced air. This can be in special drying boxes, false bottom peanut trailers, open-weave sacks, or on concrete floors. Drying time is greatly reduced by moving as much dry air over the pecans as possible.