September 14, 2015
The National Pecan Shellers Association has released their estimate of the 2015 crop at 329 million inshell pounds. This is similar to the Texas Pecan Growers estimate released in July. The Shelling Industry generally agreed that all productions states have had a good growing season and assuming no unforeseen negative weather events between now and harvest, the industry should experience a good on-year crop.
Conversations centered around China and the unknown demand that they will have for the crop. As you may recall, China's demand for pecans increased last year over and above their handle of the previous year and that demand, coupled with a shorter than hoped for 2014 harvest, created less volume to support kernel demand. As such, more of the total supply has shipped to the customer year to date than the prior year.
Below are a couple of charts of interest. The first is a chart of year to date USDA/FAS reported exports to the Chinese market. While all years prior to the 2014 crop have a full year of reporting, (October-September), the 2014 crop is currently reported from October through July. USDA/FAS will continue to report exports for July and August as the information becomes available. So the chart below still has two months of exports to be reported before we know the final export number for the 2014 crop year.
The second chart shows exports from US ports from the October thru December time frame. This information allows you to view demand from China for first available harvest. With recent changes in the Chinese economy and the jailing of 40 plus Chinese traders that resulted from the Chinese government crackdown on those traders manipulating the payment of tariffs, there are questions on how China will react this fall to the upcoming harvest.
Also, China typically takes the majority of the South African crop but it has been reported that South Africa continues to have uncommitted inshell available and that China showed less demand for their harvest than in the prior year. The South African harvest runs from June thru August. It is also notable that the 2016 Chinese New Year is several weeks earlier than in 2015. This will influence timing of actual shipments during the October-December period as China will need the product to arrive for processing more quickly than in 2015 due to the timing of the Chinese New Year. It remains to be seen what impact China will have on our total available supply for kernel consumption from the upcoming harvest.
Cold storage holdings at October 31st are expected to be the lowest in many years. Below is a chart that shows cold storage carry-in for the past 10 years.
The major remaining area that will influence total supply is Mexico. Mexico is also reporting a good growing season and potential for a large crop. Early reports from Mexico indicate that they may produce a total crop of 260 million inshell pounds. Not all of those pecans are available for US consumption. During the Shellers' group meeting, we estimated that we could have as much as 165 million inshell equivalent pounds imported from Mexico to the USA from the upcoming harvest.
The chart below shows consumption from prior years and estimated total supply based on the NPSA estimate of USA crop and Mexican imports. As you will see below, it is expected that our total supply will be similar to that of the 2014/15 crop.
|USDA ColdStorage Carry-In 10-31||169||100||67||99||128||139||120||73*|
|US Crop perUSDA||202||302||294||270||367||266||264||329**|
|Net Imports MX||80||120||128||100||152||130||140||165***|
| || || || || || || || || |
*Estimated; ** NPSA Crop Estimate; *** NPSA Mexico Import Estimate (Consumption reflects all channels including China inshell consumption
In summary, here is what we know.
1. The 2014 crop was shorter than expected
2. Chinese demand increased significantly with an unexpected increase coming in January after most kernel contracts were written leaving the Pecan Shelling Industry in a shorter available supply
3. While pecans are generally cyclical by nature, the 2013 and 2014 crops produced two short crops back to back
4. Total supply available for kernel consumption was minimized due to shorter overall supply and increased China demand
2015/16 Crop:June 2015 report is listed below.
5. We will have the shortest carry-in supply that we have seen in many years
6. The carry-in will no longer exist of an oversupply of pecan pieces. Over the past three years, we have seen an oversupply of pecan pieces but due to the shorter total supply from the 2014 crop, the excess inventory has been consumed
7. We are hopeful for a good on-year crop cycle for the 2015 harvest
8. Imports from Mexico are expected to be larger due to their larger crop size
9. Overall supply will be similar to last year
10. China will certainly be active and will play a significant role in the total supply that will be available for kernel consumption in 2016
The next estimate will be the USDA estimate which will be released at noon on October 9, 2015.
If you would like to discuss in more detail scenarios that may develop during 4th quarter and the 2016 selling year, please be sure to give me a call at 843-319-5605 or 800-469-6607.
Executive Vice President
July 2015 report is listed below.
September 2015 report is listed below