PECAN MARKET IN 2010 AND OUTLOOK FOR 2011 Jose G. Peña, Professor and Extension Economist-Management g Texas AgriLife Extension Service Uvalde, TX 2011 Southeastern Pecan Growers Association 104th Annual Convention Beau Rivage Biloxi, MS February 25 & 26 2011 1 PECAN MARKET IN 2010 AND OUTLOOK FOR 2011: Pecan Supply/Demand Situation Production, carry-in stocks, supplies Imports and Exports-Exports Exports Exports to China What is the Market Offering? Industry at Critical Crossroads Domestic vs vs. Exports 2 U.S. PECAN PRODUCTION 1990--2010 1990 AVG. 281 2000--2010 AVG. 257 2000 ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011 3 PECAN PRODUCTION AVERAGE 2009 - 20101 Native/Seedling Improved TOTAL 12010 Mil. Lbs 51.3 229 229.5 280 8 280.8 18% 82% 100% Preliminary estimate 4 U.S. PECAN PRODUCTION AND COMPOSITE FARM PRICE 2000 000 - 2010 0 0 ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011 5 6 U.S. PECAN DOMESTIC CONSUMPTION (IN(IN ( -SHELL BASIS)) 1977 1977--09 Million Pounds ’01-’09 AVG 305 Source: Fruits and Tree Nuts Situation and Outlook Yearbook/FTS/October 2010 Economic Research Service/USDA 7 IMPORTS AND EXPORTS 8 PECAN IMPORTS & EXPORTS, ININ-SHELL EQUIVALENTS 2000 2000--2010 2010, (CALENDAR YEAR) Million Lbs. Source: USDA‐FAS February, 2011 9 MEXICO 10 PRODUCTION AND DOMESTIC CONSUMPTION IN MEXICO 1994--2010 1994 Million Pounds Source: September 2010 Mexico Tree Nuts Annual Gain Report (MX 0063), USDA-FAS MY-Marketing Year (Oct.-Sept.) 11 NORTH AMERICA TRADE ZONE 12 AVERAGE ANNUAL PECAN PRODUCTION, 20012001-2010 East vs vs. West Average Production 2001-2010: 421.7 Million lbs 1Eastern States - Alabama, Arkansas, Florida, Georgia, Kansas, Louisiana, Mississippi, Missouri North Carolina, Oklahoma and South Carolina States – Arizona, California, New Mexico and Texas 2Western 13 PECAN IMPORTS & EXPORTS BY COUNTRY, IN--SHELL EQUIVALENTS AVERAGE, 2007 - 2010 IN IMPORTS 2007-10 Average: 161.6 Million Lbs. 1 Other: Australia, South Africa, Peru, Israel Source: USDA-FAS, February ,2011 EXPORTS 2007-10 Average: 134.4 Million Lbs. 2China, Hong Kong and Vietnam 14 EXPORTS TO CHINA 15 PECAN EXPORTS TO CHINA/HONG KONG AND VIETNAM, 20022002-2010 IN--SHELL (SHELLED CONVERTED TO IN IN IN--SHELL) (CALENDAR YEAR) Million Pounds Source: USDA‐FAS February, 2011 16 PECAN EXPORTS, COMPARING 2009 TO 2010 IN--SHELL EQUIVALENTS IN 2009 TOTAL: 143.5 Million Lbs. 1China, TOTAL: 146.7 Million Lbs. Hong Kong and Vietnam Source: USDA-FAS, February ,2011 17 U.S.. PECAN E U.S EXPORTS XPORTS TO ASIA1; BY MONTH 2010 IN--SHELL EQUIVALENTS (MILLION POUNDS) IN Million Pounds 1Hong Kong, China and Vietnam 18 U.S. PECAN E U.S. EXPORTS XPORTS BY MONTH 2010, IN--SHELL EQUIVALENTS (MILLION POUNDS) IN Million Pounds Total Exports: 146.6 million pounds 19 U.S. PECAN IMPORTS/EXPORTS FROM MEXICO U.S. BY MONTH, 2010, ININ-SHELL (MILLION POUNDS) Million Pounds Total Imports: 193.4 million pounds Total Exports: 32.2 million pounds 20 PECAN EXPORTS TO CHINA, BY COUNTRY -2008 IN--SHELL EQUIVALENTS IN Q TOTAL: 56.8 Million Pounds 21 DEMOGRAPHICS OF CHINA Population: 1.3 Billion (2007) (80 cities with more than 1 Million +) Middle Class: 260 Million (20%) Gross Domestic Product (2006): $3.42 Trillion U.S.D. (4TH) Per Capita (Nominal): $2,034 $ U.S.D. (107TH) All Products: China is 3rd Importer; p 2nd Exporter p (Source: Wikipedia) NOTE: U.S. middle class, about 60% of population 22 U U.S. S CHINA EXCHANGE RATES 2007 20101 % Change Ch g $1 : 7 7.80 80 Yuan $1 : 6.83 6 83 Yuan - 12% 1January 2011 - $1 : 6.61 23 MARKET SITUATION 24 U.S. IMPROVED AND NATIVE PECANS, 20002000-2010 PRODUCTION AND AVERAGE PRICE RECEIVED (IN(IN-SHELL) Million Pounds Cents/Lb. 387 339 282 302 280 260 207 210 173 186 202 ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011 25 Pecan CarryCarry-over Stocks, InIn-Shell 1997 1997--2010 End of September Million Pounds USDA‐NASS, Cold Storage Report, January 21, 2011 Stocks as of September 30 26 U.S. PECAN PRODUCTION, STOCKS & PRICE, 20002000-2010 IN--SHELL BASIS IN ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011 27 U.S. PECAN PRODUCTION, STOCKS, IMPORTS & PRICE 2000 2000--10 – IN IN--SHELL BASIS Million Pounds Cents/Lb. 582 525 464 581 544 475 436 446 474 548 479 ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011; Imports 2010 estimated based on FAS January-November 2010 report, USDA-NASS Cold Storage Report, January 21, 2011 28 COMPETITIVE TREE NUTS 29 U.S. ALMOND AND WALNUT PRODUCTION, 2000--2010 2000 Billion Pounds ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011 30 U.S. TREE NUT PRODUCTION, 20002000-2010 MACADAMIA, MACADAMIA PISTACHIO, PISTACHIO ALMOND, ALMOND HAZELNUT, HAZELNUT WALNUT AND PECAN Billion Pounds Cents/Lb. ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011 31 PRICE COMPARISON PECANS ALMONDS WALNUTS 32 AVERAGE PRICES FOR ALMONDS, WALNUTS AND PECANS 2000 - 2010 (IN(IN-SHELL BASIS) Cents/Lb. ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011, Pecan price based on composite price NOTE: 2010 Walnut prices not published 33 AVERAGE PRICES FOR ALMONDS, WALNUTS AND PECANS 2000 - 2010 (FARM PRICE SHELLED BASIS) Cents/Lb. ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011, Pecan price based on composite price, based on USDA’s 2000-2009 average yield NOTE: 2010 Walnut prices not published 34 What Can We Expect This Coming C i Season? S ? 35 ON-Year Pecan Production 1997-2009 1997 1999 2001 2003 2005 2007 2009 Avg (Million Pounds) AL 13.0 13.0 15.0 8.0 4.0 12.0 14.0 11.3 AR 3.5 3.8 2.6 3.8 2.3 2.3 2.5 3.0 AZ 18.5 22.8 21.0 22.5 22.0 23.0 20.0 21.4 CA 3.0 1.9 3.7 3.7 4.0 4.4 3.9 3.5 FL 1.8 3.7 3.3 2.1 1.0 1.9 3.1 2.4 GA 100.0 120.0 110.0 75.0 80.0 150.0 90.0 103.6 KS 42 4.2 50 5.0 22 2.2 20 2.0 32 3.2 05 0.5 10 1.0 26 2.6 LA 12.0 22.0 14.0 20.0 5.0 14.0 9.0 13.7 2.6 0.005 MO 1.8 1.5 MS 4.0 5.0 4.5 7.0 1.0 3.0 3.0 3.9 NC 1.5 1.2 3.2 2.5 2.0 0.2 0.0 1.5 NM 45.0 52.0 60.0 55.0 65.0 74.0 68.0 59.9 OK 35.0 63.0 20.0 6.0 21.0 30.0 13.5 26.9 SC 3.5 2.7 4.0 4.5 2.2 2.0 2.0 3.0 TX 90 0 90.0 90 0 90.0 75 0 75.0 70 0 70.0 65 0 65.0 70 0 70.0 60 0 60.0 74 3 74.3 335.0 406.1 338.5 282.1 280.3 387.3 302.0 333.0 U.S. ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011 36 PECAN ON AND OFFOFF-YEAR PRODUCTION (1996 2010) (1996-2010) Million Pounds AVG. ’97-09, 333 On-Year ’96-10, 199 Off-Year ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011 37 38 http://drought.unl.edu/dm/forecast.html 39 U.S. IMPROVED AND NATIVE PECANS, 20002000-2011 PRODUCTION AND AVERAGE PRICE RECEIVED (IN(IN-SHELL) Million Pounds Cents/Lb. 387 330 339 282 210 173 302 280 260 207 186 202 ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011 40 IN-SHELL PECANS INCOLD STORAGE STOCKS STOCKS, 20032003-2010 Source: USDA-NASS, Cold Storage Report, January 21, 2011 Stocks as of September 30 41 IN-SHELL PECANS INCOLD STORAGE STOCKS, 2010 AND 2011 PROJECTED Source: USDA-NASS, Cold Storage Report, February 22, 2011 NOTE: 2011 Projected through September based on the average monthly use January-September, 2009, 2007, 2005, 2003 after on-season years 42 U.S. PECAN PRODUCTION, STOCKS & PRICE, 20002000-2011 IN--SHELL BASIS IN ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011; USDA-NASS, Cold Storage Report, February 22, 2011 43 U.S. GROSS DOMESTIC PRODUCT 2006--2010, BY QUARTERS 2006 Trillions of Current Dollars +3.4% +4.6% +3.7% +4.8% +4.7% -4.0% -3.9% +2.3% % Change at annual rates Q Quarterly y data at seasonally y adjusted j annual rates Source: Department of Commerce, Bureau of Economic Analysis Updated from January 2011 Economic Indicators U.S. IMPROVED AND NATIVE PECANS, 19801980-2010 PRODUCTION AND AVERAGE PRICE RECEIVED (IN (IN--SHELL) Cents/Lb. C t /Lb 167 105 ¹ Source: USDA-NASS, Noncitrus Fruits and Nuts 2010 Preliminary Summary, January 21, 2011 45 PECAN BREAK BREAK--EVEN PRICES PER POUND, BASED ON WHOLESALE PRICES AND PERCENT SHELLSHELL-OUT Assumptions: Shelling Cost $1.25 Per Shelled Pound Pecan Wholesale Price Shelled $ 4.60 $ 4.80 $ 6.00 $ 6.20 $ 6.40 $ 6.60 1.42 $ 5.00 $ 5.20 $ 5.40 $ 5.60 $ 5.80 $ Break-even Price p per Pound In-shell 1.50 $ 1.58 $ 1.66 $ 1.74 $ 1.82 $ 40% $ 1.34 $ 1.90 $ 1.98 $ 2.06 $ 2.14 42% $ 1.41 $ 1.49 $ 1.58 $ 1.66 $ 1.74 $ 1.83 $ 1.91 $ 2.00 $ 2.08 $ 2.16 $ 2.25 44% $ 1.47 $ 1.56 $ 1.65 $ 1.74 $ 1.83 $ 1.91 $ 2.00 $ 2.09 $ 2.18 $ 2.27 $ 2.35 46% $ 1.54 $ 1.63 $ 1.73 $ 1.82 $ 1.91 $ 2.00 $ 2.09 $ 2.19 $ 2.28 $ 2.37 $ 2.46 48% $ 1.61 $ 1.70 $ 1.80 $ 1.90 $ 1.99 $ 2.09 $ 2.18 $ 2.28 $ 2.38 $ 2.47 $ 2.57 50% $ 1.68 $ 1.78 $ 1.88 $ 1.98 $ 2.08 $ 2.18 $ 2.28 $ 2.38 $ 2.48 $ 2.58 $ 2.68 52% $ 1.74 $ 1.85 $ 1.95 $ 2.05 $ 2.16 $ 2.26 $ 2.37 $ 2.47 $ 2.57 $ 2.68 $ 2.78 54% $ 1.81 $ 1.92 $ 2.03 $ 2.13 $ 2.24 $ 2.35 $ 2.46 $ 2.57 $ 2.67 $ 2.78 $ 2.89 56% $ 1 1.88 88 $ 1 1.99 99 $ 2 2.10 10 $ 2 2.21 21 $ 2 2.32 32 $ 2 2.44 44 $ 2 2.55 55 $ 2 2.66 66 $ 2 2.77 77 $ 2 2.88 88 $ 3 3.00 00 58% $ 1.94 $ 2.06 $ 2.18 $ 2.29 $ 2.41 $ 2.52 $ 2.64 $ 2.76 $ 2.87 $ 2.99 $ 3.10 60% $ 2.01 $ 2.13 $ 2.25 $ 2.37 $ 2.49 $ 2.61 $ 2.73 $ 2.85 $ 2.97 $ 3.09 $ 3.21 62% $ 2 2.08 08 $ 2 2.20 20 $ 2 2.33 33 $ 2 2.45 45 $ 2 2.57 57 $ 2 2.70 70 $ 2 2.82 82 $ 2 2.95 95 $ 3 3.07 07 $ 3 3.19 19 $ 3 3.32 32 64% $ 2.14 $ 2.27 $ 2.40 $ 2.53 $ 2.66 $ 2.78 $ 2.91 $ 3.04 $ 3.17 $ 3.30 $ 3.42 46 SUMMARY Industry at critical crossroads: Domestic vs. Exports Production - Avg. 283 million, 2007-2010 - Avg. A g 255 million, illi 2000 2000-2010 2010 Prices Up Past 8 Seasons 2010 Record High Prices Exports p to China Influenced Market Prices 2010/11 Season = High off-year - Low carry-in y stocks Low forecast crop from Mexico Supplies about 540 million (production, stocks and imports) Below 2009 47 SUMMARY (CONT (CONT.)) 2011/2012 / Season - On-year y - Production about 330-340 million pounds Carry-in stocks about 50-70 million pounds 380-400 million pounds (not including imports) Just slightly higher 2010/11 Imports from Mexico: Mexico (Large On On-year year Crop Expected) U.S. Economic Situation Export E t Dependence D d Market Outlook Promising 48