By Jose G. Peña
The U.S. pecan harvest is gradually gaining momentum in October with excellent demand and good prices for excellent quality pecans intended for gift pack, fund-raiser and Thanksgiving markets. Excellent quality pecans for these specialty markets are bringing about $1.50-$1.80 per pound, depending on the variety, quality, etc.
USDA's initial October 10 new crop production forecast of 281.9 million pounds is up 63 percent from last year's crop of 172.9 million pounds, but down 16.7 percent from 338.5 million pounds produced in 2001 when the market collapsed. In addition, carry-in stocks as of September 1, at 90.5 million pounds, were down 57.6 percent from last year's stock of 213.3 million pounds and down 38.8 percent from 147.8 million pounds in 2001, at that same time.
This means that the current estimate of total supplies (production plus stocks) at 372.4 million pounds is down 3.6 percent from last year's supply estimate of 386.2 million pounds when prices improved over the previous year.
In addition, it appears that pecan demand increased starting in July with an average monthly use of 26.5 million pounds during July-September, compared to typical average monthly use of just over 20 million pounds during these same months of previous years. The stock estimate dropped an additional 20.8 million pounds to 69.7 million pounds as of the end of September from the 90.5 million pounds on September 1, down 61.3 percent from last year's stocks of 180.1 million pounds at the same time.
While the harvest is slowly gaining momentum, it appears that good quality pecans for those specialty markets mentioned above are scarce.
Except in North Carolina, with a crop forecast of 2.5 million pounds, the U.S. pecan crop was apparently unaffected by the two major hurricanes during early September. Hurricane Isabel turned north, up the East Coast toward Virginia, but high winds and rain probably caused as much as 50 percent of the nuts to drop in North Carolina. Hurricane Marty, which hit the upper Mexican Pacific coast in Sonora State Mexico, Arizona, and New Mexico, created additional rain but apparently almost no damage to the crop. A very dry spring this year, followed by excessive rain and high humidity since July across the U.S. pecan belt but especially in the Southeast, has caused a reduction of the size of some state crops and some quality erosion.
Georgia's crop, which was initially forecast by the industry in July at 115 million pounds, was dropped to 70 million pounds in USDA's October 10 initial forecast. Georgia was initially dry, but excessively wet weather since July and especially in September during and after Isabel has plagued the crop with scab disease, pest problems, and a heavy nut drop in July.
While the harvest in Texas is just gaining momentum and the states west of Texas are slightly behind schedule, most of these states report a potential for excellent quality, especially the crop in Mexico. About 62 percent of the U.S. crop is forecast to be produced in these western states, including Arizona, 23.5 million; California, 3.7 million; Kansas, 2.3 million; New Mexico, 55 million; Oklahoma, 20 million; and Texas, 70 million. Mexico is forecasting a crop of 140.8 million pounds.
Commercial quality pecans in bulk lots are being bid at about $2-$2.50 per point ($1-$1.25 per pound for pecans with 50 percent meat yield). As a result, with average annual domestic consumption of about 275 million pounds since 1995 and slightly lower supplies than last year, the pecan market should hold at current price bids or maybe improve slightly, unless the size of the crop has been underestimated.
Keep in mind that the market collapse in 2001 was heavily influenced by the effects of the 9/11 disaster, a weakening economy, reduced confidence in corporate America, the collapse of the stock market, and stiff competition from a then-record tree nut crop. Markets for other activities such as travel, cattle, etc. were similarly influenced.
While the Iraq situation still looms in the minds of American consumers, most of the negative effects of the 9/11 disaster are behind us. Beef cattle prices reached all-time record highs this fall. The economy is recovering and the U.S. population is ready to resume more normality in their lives. This means improved consumer demand, as evidenced so far this season for good quality products, especially healthy commodities such as pecans.
In terms of the pecan crop in Mexico, the principal pecan exporter to the U.S., USDA's Foreign Agricultural Service is forecasting a crop of about 140.8 million pounds in Mexico. Pecan imports from Mexico were averaging about 60 million pounds, but increased to close to 100 million pounds during the past two years.
A 140.8 million pound crop indicates that U.S. imports from Mexico will likely approximate the average of the last two years, depending on price bids in U.S. markets. Keep in mind, however, that Mexico does not have any pecan storage capacity. Mexico is the principal importer of U.S. pecans. 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 U.S. will export 20-25 million pounds to Mexico, starting about the end of next April. The net effect is that Mexican imports will increase U.S. supplies by 50-70 million pounds, depending on price.
U.S. tree nut consumption increased during the 2002/03 season to set a record for the second year in a row. Per capita consumption in 2002/03 reached 3.04 pounds, 10 percent higher than last season's consumption.
Tree nut consumption strongly reflects the cyclical nature of production. Consumption is higher during years of high production because processors will buy bigger supplies during those years and store the excess to use during the low production years. As a result, consumption data show declines in per capita use of hazelnuts, pecans, and macadamias, all crops that had production declines in 2002. Walnut consumption rose in 2002/03 to .45 pounds per person with the help of large carryover stocks from the previous season's record crop. Pecan per capita consumption remains at a relatively flat one-half pound.
The combined effect of record tree nut production with the effects of the 9/11 disaster and a weakening economy pulled prices down for almonds, walnuts and especially pecans. Strong take-off from export markets helped almond and walnut markets as these commodities have established excellent export markets worldwide. Only about 10 percent of U.S. pecan production is exported.
If realized, USDA's October 10 initial estimate of total tree nut production for the 2003/04 season, at 2.217 billion pounds, will be down two-tenths of one percent from last season's record tree nut crop of 2.221 billion pounds.
Promoting Health Benefits
The recent release of information about the health benefits of nuts, especially pecans, should advance grower prices and demand if properly promoted. A positive demand increase by consumers due to the health benefits of other commodities, such as in the produce industry, has been documented.