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An Overview and
History of Pecans in California
by Brian Blain
April 8, 2003
Table of Contents:
The Pecan Industry in 2003 – an overview
Pecan Producing Areas
California Producing
Areas
Pecan Yields and
Growing Costs.
Pecan Market and
Grower Prices
Alternate purchase agreements are becoming more common
in the pecan industry.
California
Market and Grower Prices
The Pecan Industry in
2003 – an overview
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Pecan, the only native nut in the U.S., is commercially grown in 14 states
across the country. The trees are of two basic types; native or seedling,
and improved varieties. Native pecans are varieties that developed under
natural conditions, usually growing wild along river-bottom areas. Seedling
pecans are of the same parentage but are produced from seed (nut) and have
not been budded or grafted. Improved pecans are varieties that have been
genetically altered through breeding and grafting to produce more nuts, and
better quality nutmeat than natives or seedlings.
Pecan Producing Areas
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The U.S. is the world’s largest pecan producer by far, with pecans also
growing in Mexico, Australia, South America, Israel, and South Africa.
Pecans are a warm weather crop, requiring some winter chilling, limiting
U.S. growing areas to the southern states and the southwest. The top five
states in order of native pecan production during 1970-1999 were Texas,
Georgia, Alabama, Louisiana, and Oklahoma. The top five states in order of
improved pecan production for the period 1998-2002 were Georgia, N.M., TX,
AZ, and Alabama. When total production is included, Georgia is the largest
producer, followed by Texas, New Mexico, Oklahoma, and Arizona.
There is a significant trend of increased production in the west (west
Texas, New Mexico, Arizona and California) and a decline in production in
all other areas of the U.S. In 2001, approximately 40% of the U.S. crop was
grown in the west. Profitability has also been declining in the south,
compared to the west where production per acre is actually on the increase.
There have been very few new orchards planted across the U.S. during the
last 10 years. Most of the shift in production is due to loss of trees and
production in the south, and increased production per acre in the west.
Another trend is the increase of improved pecan production compared to a
decrease in native production. Native orchards are severely alternate
bearing compared to improved varieties, and are occasionally not harvested
at all, in “off” years. Over the last 5 years, native production averaged
30% of the total pecan production.
California Producing Areas
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Primary California producing areas are located in the same areas as other
nut crops, from Chico-Orland area in the north to Bakersfield in the south.
Limited production is found as far south as San Diego County, and in the
southeast desert areas of the state. Pecans are much more tolerant of heavy
soils and spring frost than other nut crops, hence the diverse growing area.
The first commercial pecan orchards in California were planted in the mid
1970’s in the Visalia-Clovis area. Planting slowed in the 1980’s along with
other nut crops in the state. Production suffered in the early 1990’s
resulting in the removal of several pecan orchards in California. In the mid
late 1990’s a resurgence of plantings began in the Sacramento valley, as
rice and other crops became unprofitable. New plantings continue in other
parts of the state as well.
Since that time, California pecan production has increased to its largest
crop ever at 3.7 million pounds in 2001, on approximately 2800 acres.
California orchards have had their highest production per acre for the last
three years, breaking all records for 3-year production across the U.S. Most
of this is due to new orchard practices implemented in the late 1990’s
including crop thinning, hedging, and the registration of new pesticides to
control aphids. California is now the 7th largest of 14 pecan producing
states, based on the last five years production. New orchards are being
planted every year, but much more limited than in the 1970’s.
Pecan Yields and Growing Costs.
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Unlike other nut crops grown exclusively in California, pecans are grown in
hundreds of different climates and soils. Orchards are grown from sea level
to as high as 5000 ft, and from desert areas of California to humid
southeast Georgia. As a result, the peak production per acre varies from 600
lbs per acre in parts of the southeast to 3500 lbs in the southwest. Kernel
yields also range from 30% in native trees to 62% in western improved
orchards.
Growing costs vary even more. Native orchards commonly receive no cultural
input at all until harvest, when the crop is gathered by hand. Western areas
require intensive farming practices, including 100% of the water requirement
supplied by irrigation, compared to areas in the southeast where 100% of the
water needs are supplied by rainfall. Insect control in the humid southeast
is many times more expensive than the west, where the only insect we have to
control is aphid.
Growing costs in California are probably the highest in the U.S., due to the
necessity for dehydrating the crop, high labor and energy costs, and land
cost. Fortunately, during the last few years California has had the highest
production, highest kernel yield, and highest prices received for the crop.
Over the last 10 years, the most profitable pecan growing areas have been
around Las Cruces, NM and selected areas of west Texas. Most California
growers have exceeded the net profits of those areas during the last 3
years.
Of all U.S. pecan-growing areas, California has the mildest climate. The
chance of catastrophic crop failure from freeze, hail, hurricane, drought or
insect is virtually non-existent in California compared to most other
growing areas.
Pecan Market and Grower Prices
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The pecan market is probably the most unpredictable of all nut crops. It is
unique compared to walnuts, almonds, and pistachios, in that very little of
the crop is exported, and as much as 25% of the consumption in the U.S.
comes from pecans imported from Mexico. It is the only nut industry with no
generic promotion program and only limited state-by-state efforts. It has no
large co-op or processor (referred to as “shellers”) controlling more than
15% of the crop, such as Diamond Walnut or Blue Diamond Almond.
In the south and southeast, the industry is made up of small accumulators
who buy pecans from growers and then re-sell them to shellers. Growers in
the west, and most large growers across the U.S., sell their crop directly
to shellers. The shellers then process the pecans to remove the kernels,
which are sold to end users such as bakeries, confectioners, ice cream
manufacturers, and grocery chains. The majority of the nuts are sold
shelled, rather than inshell, and most are sold as an ingredient rather than
a snack item.
The grower/sheller relationship most resembles the walnut industry, with
price determined by the edible kernel and weight delivered. Samples are
taken at the time the pecans are delivered to the sheller, after drying and
cleaning, and then hand cracked to determine the edible kernel yield. Price
is negotiated on an edible kernel basis, and payment follows within days or
months depending on the terms negotiated with the sheller.
Due to a number of factors, the price of shelled pecans to end-users has
been wildly fluctuating over the last few years. On several occasions,
shellers have been forced to sell their inventory at huge losses. This has
resulted in several shellers leaving the industry or going broke. Today, the
remaining shellers are very conservative in the price they pay growers, and
factor in to their grower price an ever-increasing margin of safety. To
avoid selling at a loss, shellers are paying growers a heavily discounted
price, to minimize the chance that they might have to resell the shelled
pecans at less than they paid for them.
Alternate purchase agreements are becoming more common in the pecan
industry.
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These speculative prices have resulted in co-operative selling arrangements
that minimize the risk to shellers, and maximize the return to growers. One
of the most common is called a “pool”, where the grower delivers the crop to
a sheller, who pools the nuts with those of other growers. The sheller
doesn’t pay for the pecans until after he has shelled and sold the pecans
and received payment. The grower receives whatever price the sheller
receives, less any shelling cost and profit agreed to when the crop was
delivered. It is similar to a co-op, but the grower has no ownership or
control of the shelling company.
Another method is called “custom shelling” or “toll shelling”. It is similar
to a pool, with the exception that the grower is more involved in the sale
of the shelled nuts, participating in the pricing, time of sale and the
like. This type of arrangement is usually limited to growers with large
quantities.
A third option, and one that has become more popular the last few years, is
for growers to put their crop in cold storage for several months in hope
that the sheller will not have to speculate on the price as much as during
harvest. This has increased the price paid to growers for two reasons;
shellers are able to pre-sell the nuts before paying for them, or at the
very least have a stable market later in the year. The other benefit is the
reduced strain on the sheller’s cash flow at the peak harvest/buying season,
allowing him to purchase late in the year with profits from earlier sales.
The increased use of these alternative purchasing methods has had a positive
effect on grower prices. Their continued popularity will continue to improve
grower prices.
California Market and Grower
Prices
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California growers are generally too small to economically sell their crop
to shellers outside of the state, due to trucking cost. Until 1983,
California growers were limited to sales to local inshell users and the
occasional inshell distributor. California pecans have very high kernel
yields and are worth much more as shelled pecans. As a result, prices
received by California growers at that time were significantly lower than
prices received by other western growers.
In 1983 a group of growers and investors built a shelling plant in Visalia,
and operated some of the first pecan “pools” in the industry. Since that
time, California grower prices have increased dramatically. There are now
three pecan shellers in the state, with the largest, Blain Farms, shelling
approximately 80% of the state crop. Blain Farms operates “pools” and does
not do any speculative buying of pecans. According to official USDA reports,
prices received by California growers have been the highest in the U.S. each
of the last 5 years.
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