Here & Where Are We Headed? Daniel J. Zedan Natures Finest Foods - - PowerPoint PPT Presentation

The Pecan Market: How Did We Get Here & Where Are We Headed?

Daniel J. Zedan Nature’s Finest Foods

1505 Paramount Parkway Batavia, IL 60510

Ph: 630-879-5200 Fax: 630-879-5204 Email: dzedan@nffonline.com website: www.nffonline.com

Assumptions

 USDA Crop Year: Oct 1 to Sept 30

 Data directly relates to Crop Year (2011 data refers to

the 2011 crop)

 FAS Crop Year: Aug 1 to July 31

 FAS data relates to the year it is published and not

the crop year (i.e. 2011 FAS data refers to the 2010 crop)

 Data on these slides correlate to crop

year and not publication date

‘Those who cannot remember the past are condemned to repeat it.’ (George Santayana-1905). In a 1948 speech to the House

• f Commons, Winston Churchill changed the

quote slightly when he said (paraphrased), ‘Those who fail to learn from history are condemned to repeat it.’

Overview

 Pecan Market prior to 2007  Pecan Market since 2007; China’s

entry into the market

 Current Market-How Did We Get

Here?

 What lies ahead?

Pecan Industry Prior to 2007

 Growers had little choice as to where to sell their inshell.

US Shellers were their only customers

 The bulk of both domestic and international pecan sales

went through US Shellers

 Continued decline in the commercial market for inshell

pecans

 Grower returns unpredictable and inconsistent  Mexican shelling industry almost nonexistent with no

direct entry into US Market

 Mexican Growers had few choices – Mexico or US  Australia and South Africa were ‘non-factors.’

Exports to China Prior to 2007

0.00 1,000.00 2,000.00 3,000.00 4,000.00 5,000.00 6,000.00 7,000.00 2000 2001 2002 2003 2004 2005 2006

Total Exports to China (incl: China/HK/VN) Metric Tons (Inshell Basis)

Source: Foreign Ag Statistics Service

Crop Year

What Changed in 2007?

 Two years of stable pecan prices with a near record 2007

crop.

 Prices fall dramatically  Walnut Prices hit record highs  Inshell supply chain to China changes  Value of the US Dollar  Potential for small 2008/2009 crop

Exports to China

Metric Tons (Inshell Basis)

Source: Foreign Ag Statistics Service

Crop Year

0.00 5,000.00 10,000.00 15,000.00 20,000.00 25,000.00 30,000.00 35,000.00 40,000.00 45,000.00 50,000.00

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (est)

Impact of China

 Returns to Growers increase dramatically leading to

greater investment in existing and new orchards

 US Shellers no longer dictate inshell prices  Mexican Pecan Growers and Shellers become

increasingly more independent

 Significant new plantings outside of North America  Significant shift in worldwide consumption adversely

impacts US domestic market

 Uncontrolled escalation of inshell prices leads to record

2011 prices and subsequent market crash

2014 Crop- How Did We Get Here?

 Heavy Spring Rains in the Southeast  Late Spring Freeze in the Southwest  High Prices of Competing Nuts (Especially

Walnuts)

 Disparity in Pricing of Pecan Pieces and Halves  Cheap Meats from Mexico  Cheap Prior-Year Prices on Natives

A Current State of Affairs (US)

2013 2014 (Est.) Prior Year Carry-Out 79,381.02 77,849.04 US Crop 120,806.50 120,371.04 Mexican Imports to US 79,284.90 72,575.52 Total Supply 279,472.42 270,795.61 Carry-Out 77,849.04 49,442.07 Consumption 201,623.38 221,353.54

Note: Figures are expressed in metric tons, inshell basis, and do not take into account US Inshell sent to Mexico for shelling. Meats are converted using industry standard 44% yield. 2013 Data Source: USDA NASS & FAS

Domestic Supply (US)

Source: USDA National Ag Statistics Service and Foreign Ag Statistics. **Note: 2012 US Crop Figures are estimates as the USDA did not publish final crop figures 0.00 50,000.00 100,000.00 150,000.00 200,000.00 250,000.00 300,000.00 350,000.00 Carry-In (MT) US Crop (MT) Mexican Imports (MT)

Crop Year

Mexican Exports to US

Source: Foreign Ag Statistics Service

Crop Year Metric Tons (Inshell Basis)

0.00 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00 70,000.00 80,000.00 90,000.00

World Supply

Metric Tons (Inshell Basis) Crop Year

0.00 50,000.00 100,000.00 150,000.00 200,000.00 250,000.00 300,000.00 350,000.00

South Africa (MT) Mexico (MT) Australia (MT) US Crop (MT) Carry-In (MT)

US Supply vs Demand

Metric Tons (Inshell Basis)

Source: USDA National Ag Statistics Service and Foreign Ag Statistics. **Note: 2012 US Supply & Consumption Figures are estimates as the USDA did not publish final crop figures

Crop Year

0.00 50,000.00 100,000.00 150,000.00 200,000.00 250,000.00 300,000.00 350,000.00

Total Supply (MT) Consumption (MT)

US Consumption vs. US Supply vs. Price

Source: USDA National Ag Statistics Service, Foreign Ag Statistics & Nature’s Finest Foods **Note: 2012 US Consumption Figures are estimates as the USDA did not publish final crop figures. Prices are approximate January contract prices. (i.e. 2012 Crop prices are from Jan 2013 contracting)

Crop Year

$0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00

0.00 50,000.00 100,000.00 150,000.00 200,000.00 250,000.00 300,000.00 350,000.00

Price/KG Inshell Equivalent (Metric Tons)

Total Supply (MT) Consumption (MT) Price of Jr Mam Hvs/KG

Price of Jr Mammoth Halves

• vs. Price of Medium Pieces

Crop Year Price per KG

$0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 2005 2006 2007 2008 2009 2010 2011 2012 2013

Price of Med Pcs/KG Price of Jr Mam Hvs/KG

US Pecan Exports

Metric Tons (Inshell Basis) Crop Year

Source: Foreign Ag Statistics Service 0.00 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00 70,000.00 80,000.00 90,000.00 100,000.00 Total Exports (MT)

US Pecan exports by country

Metric Tons (Inshell Basis) Crop Year

Source: Foreign Ag Statistics Service 0.00 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00 70,000.00 80,000.00 90,000.00 100,000.00

Exports - Other Countries (MT) Exports to Holland (MT) Exports to UK (MT) Exports to Mexico (MT) Exports to Canada (MT) Total Exports to China (incl: China/HK/VN)

2013 Crop Year - US Pecan Exports by Country

Country 2012 Crop Year 2013 Crop Year China (China/HK/Vietnam 45,313.28 31,868.49 Mexico 12,838.10 14,952.18 Canada 10,736.86 10,744.50 Holland 6,048.98 6,478.30 UK 5,529.83 5,130.02 Other Countries 10,684.69 11,490.58

Source: Foreign Ag Statistics Service

Note: Exports are expressed in metric tons, inshell basis. Meats were converted assuming industry standard 44% yield.

Where are we Headed?

 Consumption is the key to increasing market

size

 Must have sufficient supply to increase

consumption

 While price is important, if there is not enough

supply to handle demand, price becomes irrelevant

US Pecan Consumption vs. US Pecan Exports

Source: USDA National Ag Statistics Service and Foreign Ag Statistics **Note: 2012 US Consumption Figures are estimates as the USDA did not publish final crop figures

Crop Year Metric Tons (Inshell Basis)

0.00 20,000.00 40,000.00 60,000.00 80,000.00 100,000.00 120,000.00 140,000.00 160,000.00

US Consumption (MT) Total Exports (MT)

Mexican Exports to US

Source: Foreign Ag Statistics Service

Crop Year Metric Tons (Inshell Basis)

0.00 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00 70,000.00 80,000.00 90,000.00

Pecan Growing Regions- China

Pecans

Source: The Research Institute of Subtropical Forestry, Chinese Academy of Forestry

Chinese Plantings

 Approximately 12-15,000 hectares *  Very good research program  80% planted on hillsides in very small

• rchards. Figure includes nurseries

 Poor varietal selection, grown in the

wrong place.

 Poor orchard management

*Source: The Research Institute of Subtropical Forestry, Chinese Academy of Forestry

Chinese Orchards

Young Orchard

Pest Problems

Pecan Growing Areas- South Africa

Northern Cape Limpopo Natal Eastern Cape

Source: Savage Pecan Co

South Africa- Total Plantings (Hectares)

Source: Golden Peanut & Tree Nut

10000 20000 30000 40000 50000 60000

South Africa- Supply Projections (MT)

Source: Golden Peanut & Tree Nut

5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

2014 World Production and 2033 Production Estimates

Location 2014 Acres Yield Per Acre (KG) 2014 Total (MT) 2033 Total (MT) United States 235,730 453.66 106,926.43 139,004.81 Mexico 150,000 453.66 68,039.55 88,451.41 South Africa 50,150 725.76 36,396.63 208,763.49 World Total 211,362.61 436,219.71

US 2033 estimate assumes 3% increase per year from 2014 forward. Mexico 2033 estimate assumes 4,500 acres planted each year from 2014 forward. South African 2033 estimate assumes 12,500 acres planted each year from2014 forward. Source: George Ray McEachern, Professor of Horticulture, Texas A&M University, College Station, TX March 2014

Note: This data was presented by Mr. McEachern in March 2014 based on 2014 crop estimates available at the time. The final 2014 crop figures were different. As such, this data is presented for illustration purposes only.

How Do We Handle Anticipated supply?

 Change mindset from ‘selling’ to ‘marketing’  Develop industrywide promotion plan  Must include a financing mechanism for marketing,

promotion, research & development, standards development, statistical database, etc.

 Develop new markets, both domestically and

• internationally. Pecans are now a global commodity

 Establish working relationship with Department of

Agriculture

 Work with major customers to develop new

products

100 200 300 400 500 Millions of lbs. Production Years

• U. S. Pecan Crop 1960 thru 2012 with Exponential Trend Line

Pecan Crop

• Expon. (Pecan Crop)

500 1000 1500 2000 2500 Millions of lbs. Production Years

• U. S. Pecan Crop and California Almond Crop 1960 thru 2012 with Exponential Trend Line

Pecan Crop Almond Crop

• Expon. (Pecan Crop)
• Expon. (Almond Crop)

Sources: USDA, National Agricultural Statistics Service; 2012 Almond Almanac, Almond Board of California

≈32% Increase  ≈3300% Increase 

50 Year Crop History

$0 $200,000 $400,000 $600,000 $800,000 $1,000,000

196019621964196619681970197219741976197819801982198419861988199019921994199619982000200220042006200820102012

Thousands of $ Production Year

Farm Value of Pecan Crop 1960 thru 2012

Farm Value of Pecan Crop

• Expon. (Farm Value of Pecan Crop)

$0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000

196019621964196619681970197219741976197819801982198419861988199019921994199619982000200220042006200820102012

Thousands of $ Production Year

Farm Value of Pecan and Almond Crops 1960 thru 2012

Farm Value of Pecan Crop Farm Value of Almond Crop

• Expon. (Farm Value of Pecan Crop)
• Expon. (Farm Value of Almond Crop)

Sources: USDA, National Agricultural Statistics Service; 2012 Almond Almanac, Almond Board of California

8X Increase  134X Increase 

50 Year History-Farm Value

500000 1000000 1500000 2000000 2500000 A02/03 A03/04 A04/05 A05/06 A06/07 A07/08 A08/09 A09/10 A10/11 A11/12 Thousands of Lbs. Years (2-yr averages)

Almonds Walnuts Pistachios Pecans

Sources: USDA, National Agricultural Statistics Service



APG increase marketing from $400K to $10M



Response to marketing campaign

Comparison of US Tree Nut Supply-2002 thru 2012

Industry Happenings

 Salmonella Prevalence Study  Completed 4 year study. Results-Levels on inshell

pecans at or below levels of salmonella found on shelled almonds. Results submitted to FDA

 Tufts University Study  Study the impact of pecan consumption on heart

disease in overweight people. Further document the high antioxidant levels in pecans & impact on other biomarkers of cardiovascular risk

Industry Happenings

 New Capital Infusion  National Pecan Co.  Purchase of Harrell Pecan by Golden Peanut/ADM  Possible Industry Marketing Order  American Pecan Board established May 2013  2014-Industry meetings held  Jan 2015-Meet with FDA to consider specifics  Summer/Fall 2015-Present proposed Marketing order to

Industry

 Early 2016-Industry vote on order  Fall 2016-Implement order

Questions!!!