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Kernel prices bounce back on renewed demand

July 2, 2024

Prices for all assessed kernel items rose sharply in the global pecan market during the week ending on Monday as trade activity increased. 

Driving the moves: U.S. shellers saw more inquiries and purchases from international buyers during the June 24-July 1 assessment period, with much of the increased interest in half sizes coming from Europe and Asia. U.S. buyers also stepped in, purchasing pieces at higher levels than in the previous period.   

What they’re saying: “Essentially, whoever I offer to right now is buying,” a U.S. sheller said on Friday. “Demand seems sufficient.”  

Tell me more: The assessed price of Fancy Jr Mam H regained all the ground it lost last week and more, rising by 29 cents to $4.74/lb FOB Texas, putting it at its second-highest price level all crop year. Meanwhile, Fancy Mam H gained 30 cents after dropping 18 cents the prior period, putting it at its second-highest level since Stratamarkets began assessing the item in February.  

In addition to better demand from end-users, sellers also saw increased inter-sheller demand for halves after a sheller in Mexico went into bankruptcy and defaulted on at least a dozen containers of halves contracted to U.S. shellers, according to multiple sources and government auction paperwork. Shellers who were supposed to be receiving those containers are now scouring the market to find that product at a price that will allow them to retain a margin on contracts they signed earlier in the crop year.  

“Everyone seems to be short on halves,” said a second U.S. sheller on Friday. “Shellers have been calling around trying to buy from other shellers.” 

There is still a glut of all piece sizes, but shellers managed to sell the product at higher prices this week than last week, when some shellers moved loads at bargain prices to clear their warehouses of the remaining current crop.  

A U.S. sheller reported the first 2024 new crop kernel trade during the assessment week – one million lbs of Fancy Mam H at $4.70/lb EXW Texas to an international retailer in the U.S.   

Most other U.S. shellers say they do not plan to offer new crop for at least another month.  

Cold Storage report 

The latest USDA Cold Storage report, which was released on Tuesday, shows U.S. pecan stocks at the end of May at 249.4 million inshell (IE) lbs, up by 8.8% from the same period last year. That includes 85.7 million IE lbs of kernel and 163.7 million lbs of inshell.  

Over the past 10 years, cold storage stocks in May have averaged 252.9 IE lbs.    

Following the report’s release, some shellers expressed worry about the effects of the sluggish world economy on pecan demand.  

“With the continued wars in Ukraine and the Middle East, high interest rates, and a fairly good crop in South Africa, it could be several months before buyers feel the need to re-enter the market in any meaningful fashion,” said a third U.S. sheller in a report released on Tuesday.  

2024 crop  

U.S. sellers reacted to the year’s first 2024 crop estimate of 305.5 million inshell equivalent lbs (IElbs), released on June 22 at the TriState ArkLaMiss Pecanference. The forecast is 5% lower than the group’s 2023 crop estimate of 322 million lbs.  

The first 2024 estimate comes a month after the USDA revealed in its Noncitrus Fruits and Nuts 2023 Summary that the final utilized production of the 2023 U.S. crop was 306.75 million lbs. When adjusting for the 15% of the U.S. crop not inventoried by the USDA, the estimated actual 2023 crop production amounted to 353 million lbs. 

Harsh weather across the U.S. and Mexico is causing concern among growers. The drought in the Mexican state of Chihuahua has become serious enough that officials are considering banning the use of water for farm irrigation, which could hobble the already-dry crop. Meanwhile, Desirable-variety trees in Georgia experienced a larger-than-usual June drop, with some growers reporting that half the crop had fallen off the trees.  

A new 2024 U.S. crop estimate will be released on July 17 at the Texas  Pecan Growers Association Conference.

South Africa origin   

South African growers continued to make slow but steady sales to Chinese buyers during the week, albeit at lower price levels, with Wichita trading at $4.65/kg for a 55% meat yield and 195 count/kg and $4.85/kg for a 57% meat yield and 155 count/kg, all CFR China with 3 cent freight rates.  

Comparatively, in March, Chinese buyers were purchasing Wichita with 58% yield and 130 count/kg at $5.25/kg CIF Ningbo and spending $5.50/kg CIF Ningbo for the same yield with a 110 count/kg.  

“The Chinese market is currently focusing on smaller nuts and cheaper product to crack for kernel,” one South African sheller said on Thursday. “The buyers are looking at price and kernel ratio. Many of the smaller sizes are moving now.”   

New USDA standards 

The USDA announced on Wednesday that it is moving forward with long-debated changes to its grades and standards system for inshell and kernel meats.  

The new changes will replace the two current grades with U.S. Extra Fancy, U.S. Fancy, U.S. Choice, and U.S. Standard grades. They also create new sizing standards, slightly shifting which sizes of halves will fall under junior mammoth halves and jumbo halves.   

Many shellers are thrilled with the long-awaited changes, which they say will make it easier to market and sell pecans.  

“This will allow customers to have a lot more options on quality versus price,” said the first U.S. sheller on Friday. “It’s going to help improve consistency across the product lines for everyone.”  The new standards, which will be voluntary, are set to go into effect on July 26.