Thursday, July 7, 2016
Will increase in pecan acres lead to busted market? Jun 29, 2016 Lenny Wells, UGA Extension Pecan Specialist | Southeast Farm Press
I can’t tell you how many times I have been asked about or heard someone comment on the great potential for the pecan market to bottom out a few years down the road thanks to all the new acreage being planted. Make no mistake, anything that goes up is bound to come down at some point, but just how far down do you expect pecan prices to fall? The answer to this question depends on your level of optimism. There are a number of things to consider in all this to truly make an educated guess about the future of the pecan market. Click to read more articles in this special financial management series for Southeast farmers. Foremost on this list of considerations would have to be our export market, which as everyone knows is currently driven by China. China’s economy has many people concerned but the Chinese demand for pecans has remained strong in the face of this downturn in their economy. In addition, the fundamentals for long-term growth of the tree nut market, including pecans, in China are in place. There is an excellent article explaining the details of the optimistic outlook for the tree nut market in China available at “China’s Potential as an Export Market for Tree Nuts.” The greatest unknown factor we face in the Chinese export market is our future political relationship with China. We all hope this remains strong but if anything goes wrong here all bets are off. In addition to China, aggressive marketing of pecans is taking place in India, Turkey, and South Korea among others to help grow the worldwide demand for pecans. Another important aspect that many of the naysayers are probably not considering is the potential of the Federal Marketing Order for pecans and the impact this could have for domestic consumption. The FMO was passed and should go into effect for the 2016 crop. With the FMO, pecans now have a significant way to launch a national marketing campaign on par with some of the other tree nuts, which have reaped great rewards with their own programs. This will allow the pecan industry to get the message out regarding the remarkable health benefits of pecans on a large scale, which is a necessity for increasing domestic demand. The other necessity for increasing domestic demand for pecans (and this may be the trickiest part) is a solid, consistent supply of pecans. Currently, we do not have the pecans available in the U.S. to develop as large and sustainable a market as we would like to see. This makes it difficult to coax large companies within the food industry to develop, produce and market products using pecans as ingredients. I hear people constantly groaning that when all these trees we’ve planted come into production, we won’t be able to give pecans away. If we continued down the same path marketing our crop as it has been done for the last 100 years, they would be correct. But, the fact is, we need the increased production to develop the market we need for pecans. There will likely be growing pains along the way, as we try to balance increasing the demand for the crop with increasing our production, but this is a good problem to have. The Georgia factor And what about that increasing acreage? Just how much is it increasing and what does this mean for the future volume of pecans produced? Other states are planting pecans but from what I hear, probably not at the scale Georgia is planting. So, let’s look at Georgia to illustrate this point since Georgia produces about 30 percent of U.S. pecans. It is extremely difficult to pin down exactly how many acres of pecans we have because of orchard turnover, new plantings, unclear distinctions between managed and hobby orchards, and the complications brought about by the proliferation of yard trees and their inconsistent production. All this makes Georgia’s pecan acreage virtually impossible to accurately determine. The most recent U.S. Census of Agriculture (2012) placed Georgia’s pecan acreage at 123,415 acres. That same year, the UGA Farm Gate Survey accounted for 163,933 acres. So, let’s shoot for somewhere in the middle and say we have 140,000 producing acres. Georgia tends to average somewhere around 95 million pounds of pecans annually. If you do the math using the 140,000 acres, that’s an average of only 678 lbs/acre. This number obviously takes into account production from hobby and non-managed orchards. Commercial producers in Georgia produce much more than this—usually close to twice that amount—but this brings into question, just how many of these trees being planted now will contribute significantly to future production? Our survey estimates indicate somewhere around 20,000-25,000 new acres have been planted over the last 5 years in Georgia. At 678 lbs/acre, that’s only another 17 million pounds, which would bring us up to an average annual production of 112 million pounds. With a growing market, I don’t think this number is any kind of death toll for the pecan industry. We need this production to develop the market we are striving to have. And besides, tell me what other agricultural commodity appears to have this much potential.