Pecan Industry Slips from High Point

Mar 1, 2019  | 6 min  | Ep4428

Before the trade war began, the pecan (puh-KAHN) industry had cracked open Chinese markets and was experiencing rapid expansion. Even with the escalation of the trade war on hold the multi-billion dollar sliver of the trillion dollar agricultural industry has to reorder its thinking.

Colleen Bradford Krantz has more in our Cover Story. 

Only almonds surpass these nuts when it comes to U.S. acres dedicated to production, yet growers say many Americans are unable to identify them.

Alex Willson, Sunnyland Farms, Albany, Georgia: “A couple years ago, we went to a show up in New York for wholesale, and I’d say one of every four people that came by said, ‘Oh, walnuts.’ We said, ‘Well, not really. Actually, it’s pecans.’ So there’s a lot of work to do domestically.”

As of a year ago, enthusiasm outside the U.S., particularly in China, had climbed rapidly for a decade. Exports grew 460 percent between 1997 and 2017. And although domestic consumption was relatively steady, a combination of 2018 events – from China placing a tariff on U.S. pecans to Hurricane Michael wiping out thousands of pecan trees – have since taken the wind out of pecan producers’ sails.

This all happened as the industry was implementing a new marketing campaign, including the slogan: “American Pecans: The Original Supernut.” Producers in Georgia, which has almost a third of the nation’s pecan acres, don’t care how consumers pronounced the name of the antioxidant-rich nut as long as they look beyond the Thanksgiving pie.

Al Pearson, Pearson Farm, Fort Valley, Georgia: “The nut we grow is a puh-kahn. And some people say puh-kan, some people say pee-kan, and some say pee-kahn. And I am bound by my marriage vows to say puh-kahn. My wife has really revolted at pee-kan, thinking that was something put beside the bed in the olden days.”

Alex Willson, a fourth-generation grower at Sunnyland Farms in Albany, says the increased interest from China was a game-changer. As China began buying more U.S. pecans, the average U.S. price of all pecans grew from $1.12 per pound in 2007 to $2.59 a pound in 2016, an increase of 131 percent.

Alex Willson, Sunnyland Farms, Albany, Georgia: “My father likes to use a story from – I forget the exact year - 2006 or 2007. We had our best crop ever. And then, four or five years later, we made basically … half as many pecans and sold them for overall more dollars… The Chinese really enjoy the hickory nut, but the hickory nut had some issues with quality and production a few years ago. The pecan is actually a member of the hickory family so they used pecans that year and since then demand has stayed pretty heavy… The Chinese still prefer in-shell. They see it as a communal deal: let’s crack some pecans and discuss. But that’s the older generation. After going over to China a couple different times, you notice that the younger generation is actually more interested in a finished product.”

Farther north, in Fort Valley, Georgia, another fourth-generation producer, Al Pearson of Pearson Farm, watched as the area market forces shifted as the Chinese began to buy directly from farmers who had previously sold to shellers. The shellers were forced to compete with the Chinese buyers.

Al Pearson, Pearson Farm, Fort Valley, Georgia: “What that did was open up a market for the farmer to supply the end user with in-shell pecans versus going to a sheller…So their entry into the market raised the price and the value of the in-shell pecan, tightened up the market for the domestic shelling operations.”

As all of this played out, others began to take note. New growers invested the $2,200 per acre to plant pecan trees, trees they knew would not produce a full crop for seven to nine years.

But the industry soon encountered what one expert has called the most dramatic market shift he’s seen in a 12-month period. As part of the trade war, China increased its tariffs on U.S. pecans last year, gradually increasing it by July 2018 to the current 47 percent.

American Pecan Council leaders said a University of California-Davis report estimating that the pecan industry could face $172 million in lost export value seems conservative. The council said that mainland China imported an almost insignificant 50,000 pounds directly from U.S. pecans shellers and growers in the last three months of 2018. And Hong Kong, which normally orders 80 to 100 million pounds in October, November and December, only shipped in 5.3 million pounds in the last quarter.

Soon after exports began to fall, several pecan-producing states, including Georgia, were hit by Hurricane Michael in October 2018. About 20 percent of Georgia’s pecans trees were destroyed. The hurricane and subsequent rainfall and flooding took from the market an estimated 50 million pounds of pecans in Georgia, 8 million pounds in Oklahoma, and at least 12 million pounds in Texas.

In-shell pecan prices fell 32 percent in a year, sliding to $1.87 as the harvest wrapped up near year’s end.

In addition, data shows that U.S. pecan shellers – who are often the ones supplying retailers – are increasingly buying pecans from outside the U.S., Mexico in particular. In December alone, U.S. handlers bought almost 19 million pounds of pecans from producers in Mexico, a situation that has angered some U.S. producers. But at least one processor has argued that too many other shellers have gone out of business because of such loyalty.

By Colleen Bradford Krantz, colleen.krantz@iptv.org

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