Both markets of almonds and pecans are characterized by strong demand, certainly influenced by the pandemic. Read here about how 2020 has been a year of records for the almond industry, in terms of crop size and shipments. And learn how pecan producers have suffered these past months from the low prices, the slow exports and the competition from Mexico despite a crop of good quality and size.
2020 has been an exceptional year in many ways. For the almond industry, it has been a year of records. The production from California is expected to have reached almost 3.0 billion pounds. The shipments up until December have been increasingly high, breaking new records every month since July. During the period August-December 2020, about a quarter of the shipments were destined to Europe, another quarter to the domestic market and 35% to Asia.
Despite the recent Holidays, the market remained firm, with strong demand, and this trend is expected to continue in the coming weeks. However, it seems necessary to keep shipping at this pace in order to “get rid of” this year’s record crop and to avoid too much carry-over.
According to the latest almond position report, 74% of what was a very large crop has already been sold (shipped or committed). Last year, it was 10% with a crop that was much smaller.
The question that can be asked now is, how long will this bullish trend continue, especially considering the high prices at which the goods are currently traded.
Regarding the next crop, blooming is expected in February. But rains are insufficient this month and creating some scare for the next crop. January is a critical moment in terms of rain because it is usually the wettest month in California. Good rainfall is crucial for blooming to ensure a correct or good production of quality and quantity. Snow in the mountains also allows the water supply to recharge, but the amount is minimal this year.
Currently, the pecan market is characterized on the one hand by strong domestic demand and on the other hand by the lowest prices at the farm gate in the US in decades, although it now seems that the market might just have reached its bottom. These prices can be explained by the large 2020 crop combined with intensive imports from Mexico and low exports to China. Luckily, with the pandemic, demand for nuts has never been so high, and this year’s US crop has been of excellent quality and quantity, especially in the main producing state: Georgia.
The trade war with China is in large part responsible for a challenging year in terms of exports in 2020. The recently signed trade deal improved the situation, but the lower prices of the pecans coming from Mexico are also competing with American production. As it is visible on the American Pecan Council figure below, exports dropped by 14% compared to 2019.
In Mexico, production costs are much lower, allowing trade at prices at which American producers cannot compete. Many buyers took the opportunity of these low prices to make stocks and showed, until the end of 2020, little to no interest in the US crop.
Some farmers in the Southern part of the country (Oklahoma, Texas, Louisiana) even decided to not harvest their production this year, despite the good quality and quantity, because of the low prices and the negative return it would cost. Other farmers found salvation in selling directly to the consumers. As demand is high, interest and purchases are strong.
Stabilization of prices, regain in buyers’ interest:
On a more bullish note, it seems that the large number of shipments, especially domestically, is decreasing handler’s inventories and creating a regain of interest from them, thus stabilizing the prices. Therefore, if the trend continues, it might be good news for the American producers to be able to sell their good crop at a good price. Nevertheless, it will depend on the supply that is still available from Mexico and could remain competing with the US in the coming months.