You'll be shelling out more for pecans this year

Posted Thursday, Oct. 14, 2010

By Barry Shlachter

barry@star-telegram.com

Pecan prices are expected to approach record levels this fall, thanks to a slightly off year in production -- down an estimated 20 million pounds or 7 percent from 2009 -- and gargantuan demand from China.

The Chinese appetite for pecans exploded in 2007 when rising walnut prices made them a relative bargain, said Joe Peña, an agricultural economist with the Texas Agri-Life Extension Service. U.S. shipments to the world's most populous nation more than doubled to 25 million pounds, up from 9.2 million the year before.

A decade ago, there was hardly an American pecan on the Chinese market. Last year, U.S. shipments to China soared to 88.6 million pounds, up from 44 million pounds in 2008.

Despite higher prices, the increasingly affluent Chinese middle class still considers the imported nut a bargain compared with a native hickory nut, said Cary Millstein, a U.S.-based pecan buyer for a Hong Kong-based importer, the Welming Group.

And that's music to the ears of American growers, who supply a whopping 77 percent of Chinese imports, with Mexico and Australia splitting the rest.

"It's not a one-time deal," insists grower Danny Davis, a co-owner of the Texas Pecan Co., based in the Central Texas town of Comanche. "This is going to be a lasting market for us."

Peña says that the U.S. pecan market remains strongly under the influence of five large shelling companies but that Chinese demand has kept a steady upward pressure on prices.

The effect will be felt in the aisles of American supermarkets, translating into increasingly higher prices for bags of whole pecans and pieces this year, he predicted. Already, retail pecan prices at one major chain are up 15 percent.

Collin Street Bakery in Corsicana, which sells $35 million worth of pecan-filled cakes a year, said its mail-order prices were set in August before prices and supply were known. As a result, it will absorb the higher cost, spokesman Hayden Crawford said. The pain is mitigated by the fact that the bakery owns the nation's biggest pecan shelling company nearby, he added.

Growers have gotten initial bids of $4 to $4.50 a pound for good quality, shelled pecans for the high-end gift pack market, Peña said. (Depending on the size of the nut "meat," in-shell pecan prices can run 40 to 65 percent of the shelled price.)

The Chinese don't bake with what they call mei guo shan he tao -- literally, "American mountain peach pit." And they don't eat them in their natural state or candy them.

Instead, they process the pecan as they do a native hickory nut: cracked slightly by hand by row upon row of workers, then marinated in vats of flavored brines, which vary by region. They are dried, packed in cellophane bags and sold as a healthy snack food, Millstein said.

Many are purchased directly from Texas, New Mexico or Georgia growers by Chinese importers, who can scoop up an orchard's entire crop.

That doesn't always make them friends in the industry.

"The first time they'll buy through an American broker," said Wade Railsback of Granbury Pecan Co., himself a broker. "The next year, they'll go around them and buy from the grower, cutting out the middleman."

The commerce has gotten so rich that the big shellers, hurt by the higher prices, are looking to get into the China trade themselves, industry sources said.

They may have to wait in line.

"Everyone with a fistful of dollars is becoming an importer," Millstein said, referring to widening Chinese commercial interest as he drove from Alabama to Texas to look over the harvest. "The Chinese will speculate on a hot crop. A lot of speculators are coming into the market to compete with the real big suppliers."

U.S. growers aren't worried about China busting their windfall by growing its own pecans and flooding world markets, as it has with garlic and tilapia.

Larry Grauke, a USDA research horticulturist who has visited his Chinese counterparts, is betting against competition from Asia anytime soon.

The Chinese have known about pecans since American missionaries brought over some trees more than a century ago. But instead of using rich bottom soil like U.S. growers, the Chinese have tried -- with little apparent success -- to grow pecan trees on hillsides as they do their native hickory, Grauke said.

"Climatic, soil, pest and cultural conditions are all different," he added. "I don't know of any commercial plantings that are bearing."

Barry Shlachter, 817-390-7718