Pecan handler inventories have dropped nearly 62 million pounds over the same time last year as growers across the US and Mexico have declined to sell into the commercial sheller market. Farmgate pecan prices have fallen over the past few weeks as low offers have encouraged growers to send their pecans to cold storage.
The local area pecan spot markets will typically be made up of a handful of buyers that purchase for an even smaller handful of processors. With less activity from Chinese buyers the local buyers have only the shelling market to sell into unless they sell direct to the end user.
The commercial wholesale market for pecans becomes much more volatile when the pool of buyers shrinks and the sales channels become more concentrated. More pecan growers are beginning to sell direct to end users but the quantity of larger processing operations is limited which means limited capital to purchase inventory.
Pecan spot market prices will typically fall during the peak of harvest season but with handlers inventories falling, buyers and processors will soon require more inventory to keep the supply chains flowing.
Larger processors need to keep larger inventories in order to keep their shelling and processing lines running efficiently as well as keep contracts filled on time. Several growers I spoke with say they don’t need to sell into the lower priced spot market and will wait a few months if needed until prices recover.
If demand continues steady similar to last season processors only have 3 months of inventory before they would be completely out. Last season over the November December and January time period the industry shipped just over 100 million pounds which would consume all of the current inventory on hand.