The pecan is the only tree nut indigenous to North America, growers say. Sixteenth-century Spanish explorer Cabeza de Vaca wrote about tasting the nut during his encounters with Native American tribes in South Texas. The name is French explorers’ phonetic spelling of the native word “pakan,” meaning hard-shelled nut. Pecans are becoming a more important retail category,” says Daniel Zedan, owner and president of Nature’s Finest Foods, Ltd., a Batavia, Illinois, marketing and consulting group. “They are an extremely healthy nut. Pecans have a great flavor profile.”Facing growing competition from pecan producers in South Africa, Mexico and Australia, U.S. producers are also riding the wave of the Trump Administration’s policies to promote American-made goods.Facing growing competition from pecan producers in South Africa, Mexico and Australia, U.S. producers are also riding the wave of the Trump Administration’s policies to promote American-made goods. Axel Breuer talked to Daniel Zedan about the pecan world scene and the thriving business.
Daniel Zedan: The Pecan industry is going through a paradigm shift at the moment. For the last 100 years the United States has been the primary source of pecans. Since China entered the market – first in 2001, and then with a real entrance after 2006 as a buyer of pecans the world of pecans is radically changing.
Traditionally, the United States used to be the largest grower, Mexico was number 2 and then you had Australia number 3 with significantly smaller quantities. Australia’s production is dominated by Stahmann farms. They control about between 70 and 80 percent of all the production in Australia and probably 80 percent of all the markets in Australia. It’s been only since the advent of China that they have increased their exports and are now actually starting to increase their production. The United States would traditional produce an average of about 280m pounds a year – sometimes up to 400m pounds.
China currently consumes about 30 percent of the world’s pecan production. But it is important to notice that China has not increased consumption since 2012. China has consistently purchased 120-140m pounds – most of it coming from the US. China’s preferred varieties are ‘Desirables’ and ‘Stewards’. They’re grown in Georgia only. 2012 was the watershed year for U.S. growers: China bought approximately 100 m pounds of US pecans. Since then exports to China have declined every year.
The Clipper: Why?
Daniel Zedan: As the quantity of pecan exports from the US was limited China had to buy elsewhere – and other countries have stepped up production to meet the demand of the very profitable crop. Mexico has surpassed US production setting records each of the last 5 years. The product that will meet the Chinese standards is generally grown in the western reaches of Mexico in the Sonora area.
The Clipper: But the shipments from Mexico brought some mixed results.
Daniel Zedan: In order to try to capture as much market share as they can in the past the Mexican growers would harvest their nuts early and ship the nuts sometimes green or with too much moisture. By the time the pecans got to China you have mould – or they’ve actually started to sprout – so the Chinese try to stay away from Mexico if possible.
The Clipper: So the more important competitor seems to be South Africa
Daniel Zedan: South Africa is currently the 3rd largest producer of pecans in the world: This year they will produce about 42m pounds – but based on plantings within the next 5 or 6 years they could easily be producing well over 100 m pounds and by 2026 the harvest could exceed 200m pounds. So we’re talking about a significant change in the world’s dynamics as a result of that. 20 percent of pecans in South Africa are grown in the Natal region which would have a climate analogous to Georgia. 80 percent is grown out in the North Cape and that would be analogous to New Mexico or Arizona.
South Africa has two big advantages: Their cost of labor is among the cheapest in the pecan producing world and their crop comes in 6 months before the U.S. and Mexico. Also, it’s only half the distance to China. All this is important because the peak consumption period are the fall festivals and the New Year – and the South African harvest is able to arrive in time in China for the fall festivals. It takes about 30 days to get pecans into the ports in China and it takes about another 30 days to get it to the store shelves, a pretty long time. Usually, for the fall festivals the Chinese had to buy inventory from last year as the new harvest from the US would not arrive on time. They don’t have to do that anymore since South Africa is delivering. The Chinese know they can get fresh product it’s not been in storage for 6 or 8 months and the cost is a lot cheaper and they can get it quicker. Right now, South Africa is selling between 85 and 90 percent of their entire crop to China.
The Clipper: Sounds like a success story. Why did you go to South Africa to warn the industry?
Daniel Zedan: I was in South Africa recently because I’m you know trying to warn them that unless the world can figure out how to get China to buy more by 2025 South Africa will be producing significantly more pecans than China is willing to buy and South Africa has no domestic or international export markets for kernels. They only ship in-shell. It’s interesting: A country where macadamias and pecans are huge agricultural crops with huge exports doesn’t have a domestic market and they’re only now starting to develop a foreign market.
My warning to them is: You need to look at what happened the United States this year when China stepped out of the market because of the tariffs. You know we saw significant impact on our growers and our shellers for that matter as well. That can to happen to South Africa.
The Clipper: Did the tariffs affect US sales to China?
China is an alternate buying country. It’s not a consumer-driven country, it’s a trader-driven country. If a Chinese trader can sell it with a profit he does not care what the price is. From May 1 to the middle of November 2018 China did not order a single shipment from the US, but the reason was not the tariff war. The tariff which was only imposed in July. The real reason were record high prices in 2016. When the prices started to fall in 2017 Chinese importers bought heavily. They bought everything they could get in Mexico and South Africa. It was the second year that they bought 80m pounds on the world market – an unusual step. During the time of the 2018 crop in the US China had more pecans than they needed.
The Clipper: The tariff war is not the only trouble that the US pecan industry has been facing
Daniel Zedan: Well, then we have been hit with Hurricane Michael. In the last 15 years there has not been a hurricane that hit Georgia directly – now we had 3 within 18 months. Two of them went through the heart of the growing country. According to conservative estimates ‘Michael’ removed 750,000 trees. That results in 50-60m pounds of production. Coincidentally that would have been exactly the overproduction for world markets of last year. But Mexico had a big crop last year. They were expecting a great year as they had no competition from the Georgia crop, but China didn’t buy. They had to ship them to the US and the market plunged.
The Clipper: What is your take on the future of the Mexican industry?
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