The past used to represent a prologue to the future, although political decisions made over the past couple of years may have changed all that.
In 2018, Arizona’s pecan production weighed in at 27.9 million pounds, down just half a percent from a record crop in 2017. Those numbers were based on 17,000 bearing acres of pecan trees, up a thousand acres from the year before, with an average yield of 1,640 pounds per acre and selling at $1.87 per pound.
Although the value of Arizona pecan production was down from 2017, it still represented enormous economic impact at $52.17 million after growers expanded their groves to fulfill a growing demand for the nuts in China that amounted to 100 million pounds.
However, those days appear to be in the rearview mirror following President Donald Trump's tariff tiffs with that market that have driven prices down by as much as one-third and imports to China have dropped to single digits (9 percent at last count).
“We’ve been hit in the nose with a two-by-four by the plummeting prices and are just trying to get through it,” says Bruce Caris, Chief Operating Officer for Farmers Investment Company, parent of Green Valley Pecans in Sahuarita, Arizona, one of the larger irrigated pecan orchards in the world that runs all points of the production chain from seed to sale. “As a company, we feel that government interference in free trade is not a good thing.”
‘A SEVERE PUNCH’
To which his boss, Dick Walden, adds: “It’s been a severe punch upside the head and as the tariffs continue, we just keep digging a deeper hole with a 57 percent tariff now versus a 7 percent tariff just 16 months ago.”
You think? Pecan-utilized production over the period 2017-2018 was down 20 percent to 243 million pounds with the average per-acre yield down some 160 pounds and a crop value of $425 million -- a drop of 40 percent over the previous season -- at an average annual price of $1.75 per pound, according to USDA figures.
A Spring USDA 2019 Economic Research bulletin prophesied: “Pecan production is expected to be the smallest in nearly a decade with 221.2 million pounds (utilized in-shell basis), a drop of 27 percent from the previous year on reduced bearing acreage and lower yield.”
Quoting a U.S. Pecans report: “One of the main constraints facing the pecan industry is tariffs that exist in five target markets (China being the main one). A strategy to address these obstacles is an important and necessary component for any international marketing effort.”
Janice Dees is Executive Director of U.S. Pecans and in speaking to Arizona Sonora News, said, “The trade wars with China have hurt the industry the most, basically shutting down that market.”
STORAGE BINS STILL PACKED
With Western growers keeping an eye on the calendar awaiting first frost that will send mechanical shakers into the orchards, many cold storage bins remain packed with a crop that has yet to find a destination, far from the 2012-2018 period that saw Arizona pecan production increase by nearly 25 percent, from 22 to 28 million pounds a year --- an increase in production predicated on an increase in global demand and markets to sell to.
Dick Walden, patriarch at Green Valley Pecans, lends a strong voice to the industry and isn’t bashful about speaking up -- “The Chinese are right now very active in Mexico where the new crop will be harvested in late October while our crop won’t be harvested until sometime in December and it’s a sure bet they’ll buy pecans with a 7 percent duty long before they’ll buy U.S. pecans with a 57 percent duty.”
Walden, who processes as well as grows, says it’s hard to compete with a 50 percent difference in tariffs. “To be competitive, you need to cut prices which are already at $2 a pound in-shell, sometimes cutting them under market to take care of your customers. You need to be a high volume producer in order to clear any profit and that requires you to run lean. It’s week-to-week and day-to-day, but we intend to survive.”
Even if the added duties were removed and life returned to pre-Trump tariff levels, "it's going to take decades to repair what has been done over the last 32 months this man has been in office," Walden says.
“When you have a government policy that’s destroying markets by changing existing relationships and supply chains, it will take a long time to build back customer confidence and the ripple effect of returning to a previous level of stability won’t happen quickly.”