TRENDS IN PECAN PRODUCTION, CONSUMPTION, TRADE AND THE MARKET SITUATION Jose G. Peña, Professor and Extension Economist-Management Texas AgriLife Extension Service Uvalde, TX 2009 Texas Pecan Short Course Mesquite, Texas July 12-15, 2009

INFORMATION COVERED IN TEXAS PECAN HANDBOOK U.S. Pecan Farms and Pecan Production Trends in Pecan Production, Consumption and Trade Marketing Pecans: Preparing a Marketing Plan

PECAN PRODUCTION ECONOMICS Discuss: General Background U.S. Pecan Production Regions Trends in Pecan Production Imports/Exports Trade with Mexico Exports to China Domestic Consumption Competitive Tree Nuts What the Market is Offering

U.S. PECAN PRODUCTION REGIONS

U.S. Pecan Farms, Bearing and Nonbearing Acreage by State, 2007 # of Farms All Pecan Acreage Bearing Acres Alabama 1,323 18,025 16,055 Arizona 196 12,365 11,950 Arkansas 312 11,396 8,698 California 283 3,128 2,487 Florida 963 8,652 6,741 Georgia 3,210 114,227 102,567 Kansas 215 6,178 5,265 Louisiana 778 16,557 12,952 Mississippi 673 14,343 11,321 Missouri 391 13,369 11,117 New Mexico 1,742 39,245 35,746 North Carolina 318 1,262 826 Oklahoma 3,589 141,675 124,553 South Carolina 634 4,600 3,813 Texas 6,625 174,929 150,426 Other¹ 604 1,858 1,664 U.S. TOTAL 21,856 581,809 506,181 ¹Colorado, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Nebraska, Nevada, New Jersey, New York, Ohio, Pennsylvania, Tennessee, Utah, Virginia, West Virginia, and Wisconsin Source: 2007 Census

BEARING ACREAGE BY STATE U.S. Total = 506,181 ¹Colorado, Idaho, Illinois, Indiana, Iowa, Kentucky, Maryland, Michigan, Nebraska, Nevada, New York, Ohio, Pennsylvania, Tennessee, Utah, Virginia, West Virginia, and Wisconsin Source: 2007 Census, USDA

PECAN STATES IN 2007 Alabama, Georgia, New Mexico, Oklahoma, and Texas 75% of the pecan farms 84% of acreage Texas: Over 30 percent of farms and acreage Source: 2007 Census, USDA

VALUE OF PRODUCTION BY STATE, 2006-07 AVERAGE U.S. Total = $378,069,000 Source: USDA-NASS Noncitrus Fruits and Nuts 2005 Summary, July 2006

U.S. PECAN FARMS BY TOTAL VALUE OF CROP SALES, 2007 U.S. Total # of Farms 21,856 Source: 2007 Census, USDA

TRENDS IN PECAN PRODUCTION

Discuss: Pecan Production International Trade Domestic Consumption Imports Exports Production/Consumption in Mexico North American Trade Zone Domestic Consumption Competitive Tree Nuts

U.S. PECAN PRODUCTION 1990-2008 AVG 266 Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009

PECAN PRODUCTION AVERAGE 1999 - 2008 Mil. Lbs Native/Seedling 71.2 27% Improved 194.8 73% TOTAL 266.0 100%

U.S. PECAN PRICE 1990-2008 Cents/Lb Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009

U.S. PECAN PRODUCTION AND PRICE 1990-2008 Cents/Lb Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009

U.S. PECAN PRODUCTION 1992 – 2008 Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009

INTERNATIONAL TRADE IMPORTS AND EXPORTS

INTERNATIONAL PECAN PRODUCERS Mexico Australia Peru South Africa Israel China Argentina Brazil

IMPORTS AND EXPORTS

PECAN IMPORTS & EXPORTS 1992-2008, (CALENDAR YEAR) 11/13/2018 1:13 PM c:\My Documents\Pena\Presentations\Pecan Pograms\NOGATEC\Delicias,MX\2008\Mercado de Nuez Pecanera-Aug.27-28,2008 Source: USDA-FAS

11/13/2018 1:13 PM PECAN EXPORTS TO CHINA/HONG KONG, 2002-2008 IN-SHELL (SHELLED CONVERTED TO IN-SHELL) (CALENDAR YEAR) c:\My Documents\Pena\Presentations\Pecan Pograms\NOGATEC\Delicias,MX\2008\Mercado de Nuez Pecanera-Aug.27-28,2008 Source: USDA-FAS

PECAN IMPORTS & EXPORTS BY COUNTRY 2005-08 11/13/2018 1:13 PM IMPORTS EXPORTS 2005-08 Average: 131.8 Million Lbs. 2005-08 Average: 99.7 Million Lbs. c:\My Documents\Pena\Presentations\Pecan Pograms\NOGATEC\Delicias,MX\2008\Mercado de Nuez Pecanera-Aug.27-28,2008 Source: USDA-FAS

11/13/2018 1:13 PM MEXICO

PRODUCTION AND DOMESTIC CONSUMPTION IN MEXICO 11/13/2018 1:13 PM PRODUCTION AND DOMESTIC CONSUMPTION IN MEXICO 1994-2008 Source: 2006 Mexico Tree Nuts Annual Report, USDA-FAS MY-Marketing Year (Oct.-Sept.) 1September 15, 2008 estimate

NORTH AMERICAN TRADE ZONE

PROPORTION OF NORTH AMERICAN AVERAGE ANNUAL PECAN PRODUCTION, 1998-2008 Average Production 2001-2008: 408.5 Million lbs

AVERAGE ANNUAL PECAN PRODUCTION, 1998-2008 11/13/2018 1:13 PM AVERAGE ANNUAL PECAN PRODUCTION, 1998-2008 East vs. West ² ¹ Average Production 2001-2008: 408.5 Million lbs 1Eastern States - Alabama, Arkansas, Florida, Georgia, Kansas, Louisiana, Mississippi, North Carolina, Oklahoma and South Carolina 2Western States – Arizona, California, New Mexico and Texas

DOMESTIC CONSUMPTION

U.S. PECAN DOMESTIC CONSUMPTION (IN-SHELL BASIS) 1977-07 11/13/2018 1:13 PM ’01-’07 AVG 295 Source: Fruits and Tree Nuts Situation and Outlook Yearbook/FTS-2006/October 2007 Economic Research Service/USDA

U.S. PER CAPITA PECAN CONSUMPTION 11/13/2018 1:13 PM U.S. PER CAPITA PECAN CONSUMPTION SHELLED BASIS, 1977-07 Pounds Source: Fruits and Tree Nuts Situation and Outlook Yearbook/FTS-2007/October 2007 Economic Research Service/USDA

What is the Market Offering? PECAN SUPPLY-DEMAND What is the Market Offering?

U.S. PECAN PRODUCTION 1955-2008 AVG 266 Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009

U.S. IMPROVED AND NATIVE PECANS, 1980-2008 11/13/2018 1:13 PM U.S. IMPROVED AND NATIVE PECANS, 1980-2008 PRODUCTION AND AVERAGE PRICE RECEIVED (IN-SHELL) Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009

Pecan Carry-over Stocks, In-Shell 1997-2008 11/13/2018 1:13 PM Pecan Carry-over Stocks, In-Shell 1997-2008 End of September Source: USDA-NASS Cold Storage Report, January 23, 2009

U.S. PECAN PRODUCTION, STOCKS & PRICE, 1997-2008 11/13/2018 1:13 PM U.S. PECAN PRODUCTION, STOCKS & PRICE, 1997-2008 IN-SHELL BASIS Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009 Stocks as of September 30

U.S. PECAN PRODUCTION, STOCKS, IMPORTS & PRICE 11/13/2018 1:13 PM U.S. PECAN PRODUCTION, STOCKS, IMPORTS & PRICE 1997-07 – IN-SHELL BASIS Imports for 2008 estimated; Stocks as of September 30 Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009

COMPETITIVE TREE NUTS

U.S. ALMOND AND WALNUT PRODUCTION, 1986-2009 11/13/2018 1:13 PM U.S. ALMOND AND WALNUT PRODUCTION, 1986-2009 Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009 1 2009 Estimated

U.S. TREE NUT PRODUCTION, 1986-2009 11/13/2018 1:13 PM U.S. TREE NUT PRODUCTION, 1986-2009 MACADAMIA, PISTACHIO, ALMOND, FILBERT, WALNUT AND PECAN Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009 1 2009 Estimated

PRICE COMPARISON •PECANS •ALMONDS •WALNUTS

AVERAGE PRICES FOR ALMONDS, WALNUTS AND PECANS 11/13/2018 1:13 PM AVERAGE PRICES FOR ALMONDS, WALNUTS AND PECANS 1971-2008 (IN-SHELL BASIS) Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009

AVERAGE PRICES FOR ALMONDS, WALNUTS AND PECANS 11/13/2018 1:13 PM AVERAGE PRICES FOR ALMONDS, WALNUTS AND PECANS 1971-2008 (FARM PRICE SHELLED BASIS) Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009

Top Ten U.S. Specialty Crop Exports By Value In Fiscal Year 2004 Source: U.S. Bureau of the Census, DOC U.S. Fiscal Year (October-September)

MARKET SITUATION

PECAN ON AND OFF-YEAR PRODUCTION (1996-2008) 11/13/2018 1:13 PM PECAN ON AND OFF-YEAR PRODUCTION (1996-2008) AVG. ’97-07, 338 ’96-08, 189 Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009

11/13/2018 1:13 PM CROP FORECAST FOR 2009

U.S. IMPROVED AND NATIVE PECANS, 1980-2009 11/13/2018 1:13 PM U.S. IMPROVED AND NATIVE PECANS, 1980-2009 PRODUCTION AND AVERAGE PRICE RECEIVED (IN-SHELL) Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009

IN-SHELL PECANS COLD STORAGE STOCKS, 2003-2009 11/13/2018 1:13 PM IN-SHELL PECANS COLD STORAGE STOCKS, 2003-2009 Source: USDA-NASS Cold Storage Report, January 23, 2009

U.S. PECAN PRODUCTION, STOCKS & PRICE, 1997-2009 11/13/2018 1:13 PM U.S. PECAN PRODUCTION, STOCKS & PRICE, 1997-2009 IN-SHELL BASIS Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009 Stocks as of September 30

U.S. IMPROVED AND NATIVE PECANS, 1980-2008 11/13/2018 1:13 PM U.S. IMPROVED AND NATIVE PECANS, 1980-2008 PRODUCTION AND AVERAGE PRICE RECEIVED (IN-SHELL) 150 97 Source: USDA-NASS Noncitrus Fruits & Nuts 2008 Preliminary Summary, January 23, 2009

Pecan Wholesale Price Shelled Break-even Price per Pound PECAN BREAK-EVEN PRICES PER POUND, BASED ON WHOLESALE PRICES AND PERCENT SHELL-OUT Assumptions: Profit Margin $20.0% Sheller Profit Margin Shelling Cost $0.35 Per Pound Sheller Costs Harvest Cost $0.35 Per Pound Producer Costs Pecan Wholesale Price Shelled $3.00 $3.20 $3.40 $3.60 $3.80 $4.00 $4.20 $4.40 $4.60 $4.80 $5.00 $5.20 Break-even Price per Pound 40% $0.74 $0.81 $0.87 $0.94 $1.01 $1.07 $1.14 $1.21 $1.27 $1.34 $1.41 $1.47 42% $0.78 $0.85 $0.92 $0.99 $1.06 $1.13 $1.20 $1.48 $1.55 44% $0.89 $0.96 $1.03 $1.11 $1.18 $1.25 $1.33 $1.40 $1.62 46% $0.93 $1.00 $1.08 $1.16 $1.23 $1.31 $1.39 $1.46 $1.54 $1.69 48% $0.97 $1.05 $1.29 $1.37 $1.45 $1.53 $1.61 $1.77 50% $1.09 $1.26 $1.42 $1.51 $1.59 $1.68 $1.76 $1.84 52% $1.22 $1.57 $1.66 $1.74 $1.83 $1.92 54% $1.36 $1.63 $1.72 $1.81 $1.90 $1.99 56% $1.04 $1.32 $1.50 $1.60 $1.78 $1.88 $1.97 $2.06 58% $1.17 $1.56 $1.65 $1.75 $1.85 $1.94 $2.04 $2.14 60% $1.71 $1.91 $2.01 $2.11 $2.21

SUMMARY Wide Production/Price Swings of 90’s Wide Production Swings Starting? Imports/Exports Help Balance Supplies Trade with Mexico: 1st Source; 3rd Destination New Export markets to China, Canada and Europe Production Avg. 266 million, 1999-2008 Avg. 244 million, 2002-2008 Imports have almost doubled during last 5 years Domestic Consumption: ‘01-07 AVG 295 Mil Lbs. Prices Up Past 7 Seasons as Production Drops

SUMMARY (CONTINUED) Record high prices for almonds 2005, Walnuts 2007/08 Drought in Texas 2009/10 Season = On-year Production 280-340 million pounds Carry-in stocks 90-100 million pounds Supplies 370-440 million pounds Exports Market Outlook Good Industry at critical crossroads