UGA Extension Cook County

“Growers Must Adapt to an Evolving Pecan Industry – Lenny Wells”

“Growers Must Adapt to an Evolving Pecan Industry – Lenny Wells

This has been a year for a lot of sobering thought for Georgia pecan growers. We’ve had to deal with a lot. Trade wars, scab pressure, catastrophic storms, and perhaps most frustrating of all, depressed prices in the wake of losing half the state’s pecan crop. The storm is one thing. It’s something you don’t expect and have no hope to be able to control. Farmers know they are dealing with mother nature. Sometimes the sun shines and sometimes it doesn’t. We can deal with that. Most growers are in good enough shape financially after an 8-10 year run of high export prices to weather a year of depressed prices, although it is still a struggle. Growers have the added expense of storm clean-up, plans for orchard expansions get put on hold, and growers just hope to cover their costs and be able to move on to the next year. But, where are the signs that next year will be any better?

Things turn around fast in this business. I’ve never seen the wind sucked out of anything like I have the pecan industry within less than 12 months time. Farmers juggle multiple problems in unison all the time and are generally eternal optimists but the morale in this industry is as low as I’ve ever seen it. Of all these problems the industry faces, the one that, to me, seems the most threatening to long term sustainability, is the market situation. Georgia pecan growers can no longer survive on $1.50/lb. for the crop. Something has to change and we can’t count on another part of the industry to make that change for us or just sit around hoping the trade war will end. Growers have to change things themselves.

This is the age-old problem of this industry and it looks as though it will continue to be. I’m not going to discuss China here. We all know what the issue there is. It will be resolved at some point, but who knows how long from now? This year has exposed the fact that the industry’s problem continues to be the domestic market. We are told demand is up. If that is true and I believe it is, there must be another problem. If you grow pecans you know that prices to growers are down by at least 1/3 or more. If you look on-line or in stores to buy pecans, you see the price of pecans has not changed.

This tells us a couple of things: 1) The growers are taking the short end of the stick on the domestic market. No explanation really needed there. (And by the way, the grocery store is not the place to sell pecans until some changes are made. The reason for that is not that people don’t want pecans. The problem there is grocery stores don’t know how to store them. That’s our fault and the fault of those promoting and selling pecans. We all know pecans have to be stored in a cooler and not out on a shelf at room temperature where they turn dark and rancid. No wonder pecans don’t sell in grocery stores). 2) People have no problem paying good money for good pecans. Everyone I know who has anywhere from a few hundred lbs to several thousand lbs shelled and sells them on-line, on social media, or just by word of mouth, sells every nut they can put in a bag. In fact, in my experience, if people find out you have shelled nuts for sale, you will be bombarded for them. People want good pecans and they like knowing where they come from.

This is something every small grower (with less than 500 acres) needs to really consider. Will you be able to sell ten thousand, fifty thousand, 100 thousand lbs out of a few freezers you have in a storage building? No, I’m not talking about shelling and selling your whole crop or maybe not even 1/10 of your crop this way. But you need to start selling some. Going forward, it is apparent to me that the only way many growers, and specifically smaller growers, will be able to stay in business is to take control of some of the marketing of their own crop. Get $10-$12/lb for shelled nuts and tell the story of pecans in the process. I was told the other day of a guy with a marketing firm in Athens who was helping a client with a marketing plan for pecans. When the grower client told him he wanted to use the health benefits of pecans as a marketing tool, the marketing guy told him that he was really into fitness and health but he had never heard or seen anything about the health benefits of pecans. He had no idea. This is in Georgia. That’s downright shameful.

Larger growers could benefit from direct marketing too, and many do, but larger growers will likely always sell most of their crop to shellers when there is no export market available. Many of them have to maintain relationships with shellers/buyers to stay in business. Even though large growers are suffering in our current market as well, they are in a position to weather the storm a little easier. Even though large growers have a lot more money on the line, they generally have enough volume to sell what they need to sell to cover expenses and loans and can put the rest in storage until, hopefully, price improves a little. Small growers have to sell and shellers know it.

In the eyes of most growers, domestic shellers are to blame for the current price situation we face. But, lets look at this from their perspective too. Growers are told they can’t or won’t get anymore for the crop because U.S. shellers are buying cheaper nuts from Mexico. I don’t know that this is anything new. We have been selling so much of our crop to China because export prices have been so high, that shellers have likely been buying more product at a lower price from Mexico to keep their operations running for some time now. But, because growers have been doing so well selling to China, the domestic market was sort of put on the back-burner in most minds, or at least no one paid much attention to what was happening. Growers found a new buyer and shellers found a new supplier. Shellers adapted to the situation to survive and growers need to do the same. Its evolution.

If U.S. shellers are preferentially buying cheap nuts from Mexico, this is discouraging on many levels. If that is the case we need to see some standards set in place for nuts being sold in the U.S. because the cost of production for pecans is so high here, that we cannot grow them long term for the prices we are seeing. I fear that if this issue is not settled and U.S. shellers continue to buy large volumes of nuts from Mexico, then U.S. pecan growers, especially smaller growers, will not be able to stay in business and our shelves will be stocked with Mexican pecans rather than U.S. pecans. This could also stagnate efforts by the American Pecan Council to promote pecans and increase consumption in the U.S. If something is not done to address this situation and U.S. shellers continue to preferentially buy Mexican pecans, then our marketing order is essentially working for Mexico’s growers and U.S. shellers at the expense of U.S. growers.

Let me say here that I have always supported the American Pecan Council. I still believe the good the APC can do for this industry holds tremendous potential. Its too early into the life of our marketing order to expect it to have results on a level that would correct all the problems our industry has seen with this marketing season. If you look at almonds and pistachios, their marketing orders were in place for close to a decade or more before those groups saw a big benefit. But, we do need the APC to address this situation with the importation of Mexican nuts through the establishment of quality standards or by any means available to them because it is a direct and immediate threat to our growers and the U.S. pecan industry. A positive effort on this front will do a world of good for U.S. growers and the APC. That’s why you pay your 2 cents/lb.

So, what do growers do in the meantime? I hear a lot of rumbling about starting grower-owned pecan co-ops. Theoretically, this could do a lot of good but co-ops are not as simple a solution as they may appear. I don’t have all the answers to this but there are important legal hurdles to overcome, you have to have enough volume to matter, and everyone involved has to be trust-worthy. Co-ops can be successful but there is a huge risk to them.

When it comes to the future of your industry, don’t rely on organizations or politicians to do all the heavy lifting for you. These groups are necessary to doing business in the world. You may not get results as quickly as you would like from them but they do serve a purpose and fulfill a necessary role for improving our industry over the long term. But on the level of the individual grower there are things that need to be done as well. We cannot go forward in this industry and operate in the same ways we have been. This is true for everything from growing the crop to selling it.

We don’t have complete control over growing pecans. Mother nature has a large say in it. We have to adapt our ways of managing the crop—minimize costs, get away from some of the cultivars we have been growing and grow more scab resistant cultivars instead, address sunlight and water issues. None of these tasks are easy or happen quickly.

The same is true for marketing the crop. Growers have historically had almost no control over this. All growers will continue to sell both to domestic shellers and hopefully to the export market. But, on some level, even if its just a small fraction of your crop, direct marketing will be a key to survival, particularly for small growers. You may only start out selling a few hundred pounds out of the freezer in your garage but they will sell and for a lot more money. The demand is there. It may sound petty right now. But use this money to begin building this side of your business and go from there. It won’t be easy, it won’t be quick, nor will it be fun for most growers. But, we have come to a time when it is necessary. Will you get rich by selling a few hundred to a few thousand lbs that trickle money in over time? No, but your bottom line will improve and you will begin to take some control over what you receive for your crop. There’s a lot to be said for that.”