Buying pecans for favorite holiday dishes last year meant having to shell out more money, and 2012 might not be much better. One reason: China’s deepening taste for the hearty nut. Although a recent drought in key pecan-producing states affected some of the U.S. harvest, growers attribute rising prices to the Chinese’s relatively newfound hankering for pecans, particularly during the Lunar New Year festivities, which in 2012 begin on January 23.
“They’re taking a big chunk,” says Roger Hooper, president of the Arizona Pecan Growers Association.
These days, a pound of shelled pecans can cost anywhere from $10 to $12 at the supermarket, up from $4.50 to $5 for a pound of premium pecan halves in early 2009, according to Daniel Zedan, a pecan broker and consultant who owns Nature’s Finest Foods, a nut brokerage firm in Wayne, Ill.
The U.S. produces about two thirds of the word’s pecans in southern and southwestern states from New Mexico to Georgia. Dry conditions in states like Georgia and Texas have also reduced the peanut crop, causing peanut butter prices to spike and left the pecan crop at 252 million, 14 percent smaller than last season, according to the United States Department of Agriculture. But until China’s interest in pecans soared in recent years, prices remained stable and U.S. growers had little trouble meeting demand even in years with less-than-robust crops, Hooper says. “After China discovered pecans, things started to change.”
China started dabbling in the pecan market around 2002 but didn’t become a major player until 2007, says Zedan. Until then, Americans had consumed most of the U.S. pecans, with a small share of the crop going overseas every year. The Chinese, meanwhile, relied mostly on walnuts. Then in 2007, when the price of walnuts surpassed that of pecans due to a worldwide shortage, China turned to the less expensive nut. “Pecans were a lot cheaper and they liked pecans better,” Zedan says, adding that the Chinese also like the potential health benefits of the nuts.
But instead of continuing to depend solely on shellers who would sell them only their excess inventory, Chinese buyers started dealing directly with growers, and consumption “went through the roof,” Zedan says. In 2009, U.S. pecan production reached slightly more than 300 million pounds, and the Chinese imported 83 million pounds. As prices have climbed, pecan exports to China actually dropped in 2011 compared to the last two years, but China is still expected to buy about 60 to 65 million pounds of the nuts. By comparison, 835,500 pounds went to China in 2003.
Chinese traders mostly buy the nut still in the shell. Once in China, pecans are partially cracked, marinated and roasted. “They sell them in bags, like we sell pistachios here,” says Zedan.
In South Georgia, pecan grower Janice Craft and her husband, Scott, started doing business with the Chinese about two years ago. At first the couple tried dealing with the buyers directly, but communication was a problem so the Crafts enlisted the assistance of California brokers who are fluent in Chinese and English. “I do not speak Chinese, not yet anyway,” says Craft, who also buys pecans. She estimates that the Chinese market represents about 55 percent of the family business.
This year did not yield a particularly good crop, so the Crafts had to go to other suppliers and growers to fulfill contracts. “You don’t have a pristine year every single year,” she says. “I’m praying for a bumper crop now.”
New Mexico grower Phillip Arnold, who also is a broker, says the Chinese have transformed the industry. “The bad thing for the consumer is that the price of pecans has almost doubled in the last two to three years,” he says. On the other hand, pecan growers, like many farmers, are making healthy profits and “doing better than ever.”
The challenge for growers is to be able to meet domestic demand while fulfilling the needs of China and other emerging overseas markets. It’s a complicated endeavor. A pecan orchard takes upwards of 10 years to bear fruit, needs a lot of water and thrives in a warm climate. “It takes about 12 years before that orchard will actually make a profit,” Arnold says. “It is a long-term investment.”
If prices stay high for the long-term, people might try to grow more pecans, plant new orchards and eventually produce a large supply that results in lower prices. “But that’s going to take a while for that to happen,” Arnold says. In the meantime, if prices “get high enough, people just quit buying them.”