Demand from China Driving Pecan Prices Pie High

- January 20, 2014 2:41 PM
Categories: Commodities, Guest Post | Tags: , ,

Spend Matters welcomes a guest post from Fawaz Luna of Mintec.

The global nut market is constantly changing and popularity for a whole host of nuts just keeps on growing. High demand, specifically from Asia, is reshaping the nut industry in the US, the main exporter of a variety of nuts. The shortage of almonds this year has been well reported, but the sudden popularity of pecans is causing just as much concern.

pecan prices

The US accounts for 80% of global production for pecans. The nut is grown across the southern plains, from Arizona to North Carolina, but 40% of the total production is grown in Georgia.

Before 2002, US production was predominantly for domestic consumption. Between then and 2009, China became a major consumer. In 2009, US pecan exports to China rose by over 650% from 1,698m lbs in 2002 to 12,814m lbs in 2009, and exports remain around that level today. The Chinese demand was driven by a shift to a more health-conscious diet and the rise of the Chinese middle class. Pecan popularity has continued to grow ever since.

US pecan farmers have reacted to the increase in demand by expanding their production, often doubling their harvest acreage. However, pecan trees take 10 years to mature, so the effect may not be felt for some time.

The prices of pecans were historically dictated by their biannual nature, which sees one good harvest followed by a subdued harvest reducing supply the next year. However during a high production harvest in 2010, which would normally drive lower prices, pecan prices grew to a record high driven by the Chinese demand.

Before 2009, US prices ranged from $4.50-$5.00/lbs but rose to over $7.50 in 2011. Buyers expected these prices rises to continue, but in 2012 prices recovered to more normal levels. Forecasts for the 2012 US pecan crop, at 265m lbs, were higher than expected and more than 30% more than a normal average for an off year. The final harvested crop in 2012 was the highest volume since 2007, and prices fell. Unfortunately this was not to last, and 2013 saw prices on the rise again as output for 2014 is now thought to be lower than forecasted due to uncharacteristically high rainfall hampering production in Georgia.

The rise in pecan prices has hit US bakeries and supermarkets hard, causing prices for pecan pies to double. Some US retailers are even selling pecan pies at a loss throughout the year with only national holidays, such as Thanksgiving or Independence Day, causing enough increase in domestic demand to warrant the higher prices required to turn a profit.

Now more countries in Asia are seeing the same middle class boom, particularly India, and their taste for pecans are following the same trend as China. This continual growth could leave pecan prices in a sticky situation.

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