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Pecan Marketing Channels in New Mexico, 2010


Guide Z-307
Revised by Jay M. Lillywhite, Richard Heerema, Jennifer E. Simonsen and Esteban Herrera
College of Agricultural, Consumer and Environmental Sciences, New Mexico State University


Authors: Respectively, Associate Professor, Department of Agricultural Economics and Agricultural Business; Extension Pecan Specialist, Department of Extension Plant Sciences; Senior Research Specialist, Department of Agricultural Economics and Agricultural Business; and Extension Pecan Specialist Emeritus, Department of Extension Plant Sciences, all of New Mexico State University. (Print Friendly PDF)

Marketing Channels

Agricultural commodities often pass through several industry segments on their way from agricultural producers to food consumers. The paths that commodities take on their way from producers to consumers are called marketing channels. Examining marketing channels allows us to increase our understanding of the process that our food undergoes and identify the key players involved in the marketing chain. No matter the commodity, the marketing channel begins with the input suppliers and producers involved in the commodity's production. When examining the marketing channel for a specific commodity, we first examine the production industry. We then follow the production through to consumers by identifying marketing channel participants. Finally, we examine output avenues such as international trade.

The U.S. Pecan Industry

Pecan production has a long history in the United States that dates back to the late 1700s, although the first official planting of improved pecans did not occur until 1822 in South Carolina. Commercial propagation of pecan trees began in the 1880s. In 1925, mechanized shelling was introduced, which spurred an increase in the production of pecans on a commercial scale (Walker, 1965). Today, the U.S. dominates global pecan production, producing over 290 million pounds of pecans annually (USDA NASS, 2010a).

During the past 10 years, U.S. pecan production ranged from a low of 172.9 million pounds in 2002 to a high of 406.1 million pounds in 1999 (Figure 1). Production fluctuations can be attributed in large part to natural biological cycles of alternating years of high and low production. In addition, a large number of orchards in the southeastern United States are not irrigated, which increases the severity of alternate bearing. Annual production from improved varieties is relatively more stable than production from native trees1 most orchards with improved varieties are irrigated and are managed with good management practices. The majority of pecans (approximately 76% in 2009; USDA ERS, 2010a) produced in the U.S. come from improved varieties. Prices from improved varieties are typically higher than prices received by growers for native production (Figure 2). Data used to produce these figures can be found in Appendix I.

Pecans are produced in the southern half of the United States, mainly in the states of Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Missouri, North Carolina, Oklahoma, South Carolina, and Texas. Georgia (usually the largest pecan producing state in the U.S.) utilizes primarily improved pecan varieties, although seedlings are also in production.2 Eastern regions of Texas (usually the second largest pecan producing state in the country) primarily utilize native trees. Improved varieties are planted in West Texas, New Mexico, Arizona, and California. New Mexico's use of improved varieties has helped establish the state as a key producer of pecans; New Mexico is the third largest pecan-producing state in the U.S. in terms of pounds produced.

Fig. 1: Line graph showing U.S. production of in-shell pecans, 1980  to 2009.

Figure 1. U.S. production of pecans (in-shell basis), 1980-2009 (USDA ERS, 2010a).3

 Fig. 2: Line graph showing season-average grower price for in-shell  pecans, 1980 to 2009.

Figure 2. U.S. season-average grower price (in-shell basis), 1980-2009 (USDA ERS, 2010a).

New Mexico Pecan Industry

In New Mexico, there are 1,742 pecan operations with a total of 39,245 acres in production according to the 2007 Census of Agriculture (USDA NASS, 2010b). Pecan orchards are mainly established in southern New Mexico. Doña Ana County leads the state in annual pecan production with 72.7% of the 43.2 million pounds produced in 2008 (USDA NASS, 2010c); 68% of the state's pecan farms are located in Doña Ana County (USDA NASS, 2010d). Although the alternate-year bearing nature of pecan production traditionally causes wide variability in pecan production across years, New Mexico has less variability across production years than other regions. The relatively steady production is primarily due to previously nonbearing trees entering production and production increases in early-bearing trees; in 2007, 8.9% of New Mexico's pecan acreage was nonbearing, down from 14% in 1997 (USDA NASS, 2010d). As these nonbearing acres enter production in the next decade, New Mexico's annual pecan production is likely to increase.

High capital costs are a significant barrier to entering the pecan industry as a producer. One such capital cost is initial orchard establishment. Pecan trees reach acceptable yields about seven years after planting, and reach maximum production after 10 to 12 years. A large amount of capital is required to cover the expenses and investment for the nonproductive and low productivity periods.

In recent years, some U.S. producers have adopted specific production practices in order to market their pecan production as "certified organic." The production of organic pecans continues to increase, though at a slower pace than other organic products such as vegetables. According to the USDA, the number of acres devoted to organic tree nut production in New Mexico increased more than fivefold between 2002 and 2008, with 391 acres of organic tree nuts (the vast majority of which is pecan acreage) in production in 2008 (USDA ERS, 2010b). Detailed information regarding organic pecan production and marketing is given in Extension Circular 632, Producing and Marketing Organic Pecans in New Mexico (http://aces.nmsu.edu/pubs/_circulars/CR-632.pdf).

Pecan Marketing Channels In New Mexico4

Pecans can travel through numerous channels on their way from producer to consumer (Figure 3).

Fig. 3: Flow charts showing various available marketing channels for pecans.

Figure 3. Pecan marketing channels in New Mexico.

Accumulators, brokers, or local buyers. Once harvested, pecans may be taken directly to shellers or sold to wholesalers, accumulators, brokers, or local buyers. Growers with limited acreage can benefit by selling to accumulators, who buy pecans in small quantities and resell a large unit to shellers or wholesalers. Producers with greater acreage may also sell to accumulators, but they often sell to brokers or wholesalers instead. Few accumulators or brokers, however, operate in the West, leaving farmers to sell to wholesalers or local buyers. Local buyers are located in the areas where pecans are produced, and they buy directly from producers in either large or small quantities. Some buyers also shell pecans and sell the shelled nuts to wholesalers and retail outlets. If shelling facilities are not available, nuts are sold to commercial shellers or in-shell pecans are sold to wholesale and retail firms.

Wholesalers. Wholesalers purchase both shelled and in-shell nuts from accumulators, brokers, local buyers, or importers and resell these pecans to exporters or to domestic retail, industrial, and institutional outlets, among others.

Shellers. Shellers purchase pecans from producers or importers and separate the pecan shell from the nut meat, then grade and package the nuts. When pecans are transported to the shelling facility, the load is weighed and graded while still on the truck or trailer. Although there are USDA grades for pecans, the grades are generally not used in the West since the quality of the region's pecans typically exceeds the maximum quality of USDA grades.

After the nuts have been cracked or stripped of shells, the pecan nut meats are classified as fines, bits, pieces, or halves (halves are further classified into mammoth, junior mammoth, jumbo, extra large, large, medium, topper, and small topper categories). These meats are typically packaged in one of two ways: 1) into 2- to 12-ounce packages for sale to retail outlets, which account for a minor portion of pecan sales, or 2) into 30-pound boxes for sale to major food processing companies, which account for a majority of pecan sales in the Western United States.

Shellers sell both the nut meat and the shell byproduct. Shell byproducts may be sold for a variety of uses, such as air blasting material to strip old paint from metal, a filler material for drilling mud used in oil fields, an ingredient in particle board manufacturing, or a landscape mulch. Shellers sell nut meats to retailers for further processing or for export.

Further processing. Once pecans are shelled, they are often further processed by mixers, salters, ice cream manufacturers, confectioners, and bakers. Bakers and confectioners make up the largest part of the shelled pecan market. Bakeries use pecans for a variety of goods, such as cakes, pies, cookies, and breads. Confectioners use pecans to make sweets, such as pralines, brittle, divinity, clusters, fudge, glace, and log rolls. Pecans are also often an ingredient in breakfast cereals. Pecans for this further processing market compete with other tree nuts, such as almonds, filberts, and walnuts. Peanuts are lower priced and do not compete directly on a price basis with pecans or other tree nuts. Instead, peanuts are used primarily in salted nut mixtures and candy, while tree nuts dominate the manufacture of bakery and ice cream products.

Retail outlets. Multiple retail outlets exist for pecans and pecan products. Retailers buy shelled and packaged pecans, in-shell pecans, and food products containing pecans and then resell these items to consumers. Supermarkets and grocery stores are the largest retail outlets for pecans and food products containing pecans. Mail order outlets and gift packers are also important retail outlets for pecans and pecan products.

U.S. Pecan Consumption

Annual per capita pecan consumption in the U.S. averaged 0.46 pounds between 2004 and 2009 (Table 1). This was a slight increase from the 0.45 pounds per capita consumption recorded for the previous five-year period (1999 to 2004). Per capita pecan consumption is approximately equal to that of walnuts; pecans and walnuts both rank behind almonds, which averaged 1.01 pounds per capita between 2004 and 2009. Per capita consumption of hazelnuts and macadamia nuts is notably less than that of pecans (Figure 4).

Table 1. Tree Nuts (Shelled Basis) Per Capita Consumption (lb) 1980-2009

Season* Almonds Hazelnuts Pecans Walnuts Macadamias Pistachios Other** Total***
1980-1981 0.42 0.05 0.43 0.50 0.07 0.05 0.32 1.82
1981-1982 0.50 0.05 0.45 0.52 0.07 0.04 0.33 1.95
1982-1983 0.59 0.07 0.49 0.47 0.07 0.05 0.46 2.20
1983-1984 0.58 0.05 0.48 0.52 0.07 0.07 0.52 2.29
1984-1985 0.68 0.06 0.54 0.48 0.08 0.11 0.47 2.41
1985-1986 0.81 0.07 0.47 0.48 0.09 0.12 0.45 2.49
1986-1987 0.53 0.03 0.54 0.49 0.09 0.11 0.47 2.25
1987-1988 0.59 0.06 0.54 0.46 0.09 0.09 0.41 2.24
1988-1989 0.65 0.07 0.50 0.50 0.09 0.12 0.40 2.44
1989-1990 0.62 0.05 0.46 0.45 0.10 0.08 0.51 2.27
1990-1991 0.74 0.07 0.49 0.45 0.11 0.11 0.50 2.45
1991-1992 0.61 0.06 0.46 0.45 0.09 0.08 0.44 2.17
1992-1993 0.59 0.08 0.35 0.46 0.09 0.10 0.57 2.30
1993-1994 0.59 0.10 0.52 0.38 0.09 0.13 0.55 2.36
1994-1995 0.53 0.07 0.48 0.44 0.10 0.13 0.49 2.15
1995-1996 0.48 0.09 0.38 0.38 0.10 0.12 0.42 2.10
1996-1997 0.58 0.02 0.47 0.32 0.10 0.06 0.51 2.08
1997-1998 0.56 0.07 0.46 0.36 0.11 0.14 0.53 2.22
1998-1999 0.60 0.05 0.49 0.38 0.12 0.15 0.52 2.29
1999-2000 0.98 0.10 0.39 0.51 0.12 0.18 0.53 2.81
2000-2001 0.82 0.07 0.47 0.44 0.11 0.21 0.47 2.58
2001-2002 0.84 0.09 0.45 0.42 0.12 0.20 0.73 2.85
2002-2003 1.07 0.08 0.47 0.52 0.11 0.21 0.83 3.29
2003-2004 1.12 0.06 0.46 0.51 0.12 0.19 1.01 3.48
2004-2005 0.89 0.07 0.49 0.55 0.15 0.26 1.08 3.50
2005-2006 0.61 0.02 0.44 0.34 0.13 0.19 0.88 2.62
2006-2007 1.00 0.07 0.44 0.53 0.13 0.13 0.96 3.28
2007-2008 1.24 0.05 0.44 0.41 0.11 0.23 1.06 3.54
2008-2009**** 1.30 0.05 0.48 0.50 0.12 0.13 0.94 3.52

*Season begins in August of first year shown for almonds and walnuts, September for pistachios, October for pecans, and July for hazelnuts and macadamias.
**Includes Brazil nuts, pignolias (pine nuts), chestnuts, cashews, and mixed nuts.
***Some figures may not add due to rounding.
****Preliminary estimates.
Source: USDA ERS, 2010a

Fig. 4: Line graph showing U.S. per capita consumption of shelled tree nuts, 1998 to 2009.

Figure 4. Tree nuts (shelled basis) per capita consumption (lb), 1998-2009 season.

U.S. Trade In Pecans

The U.S. is a net importer of pecans, importing more pecans than it exports. During the 2008-2009 production season, 55.9 million pounds of shelled pecans were imported while 44.7 million pounds of shelled pecans were exported from the country (Table 2).

Table 2. Pecan Supply and Use (Shelled Basis*), 1980�2009

 
Utilized
Production
 
Beginning
Stocks
Total
Supply
Ending
Stocks
  Domestic Consumption
Season**
Imports
Exports
Total
Per capita
(1,000 lb)
(lb)
1980-1981 85,144 952 47,245 133,341 30,852 4,665 97,824
0.43
1981-1982 149,882 849 30,852 181,583 73,406 4,194 103,983
0.45
1982-1983 102,742 1,625 73,406 177,773 57,289 7,298 113,186
0.49
1983-1984 122,580 5,789 57,289 185,658 69,715 3,376 112,567
0.48
1984-1985 108,531 1,934 69,715 180,180 50,370 2,720 127,090
0.54
1985-1986 110,958 14,298 50,370 175,626 59,952 2,264 113,410
0.47
1986-1987 125,442 10,918 59,952 196,312 63,423 2,755 130,134
0.54
1987-1988 121,136 12,966 63,423 197,525 62,520 3,935 131,071
0.54
1988-1989 135,030 2,718 62,520 200,267 70,785 5,885 123,598
0.50
1989-1990 101,989 15,855 70,785 182,764 58,260 11,215 114,996
0.46
1990-1991 97,530 26,235 58,260 186,284 45,892 17,740 122,599
0.49
1991-1992 118,933 20,480 45,892 183,550 49,585 17,082 116,750
0.46
1992-1993 74,147 31,099 49,585 154,043 48,160 15,045 89,347
0.35
1993-1994 156,896 21,728 48,160 228,971 76,731 17,213 137,075
0.52
1994-1995 86,233 34,221 76,731 195,576 55,035 13,739 127,082
0.48
1995-1996 122,191 32,604 55,035 204,938 85,907 18,311 101,672
0.38
1996-1997 93,894 27,064 85,907 207,925 59,723 19,838 128,633
0.47
1997-1998 148,141 35,621 59,723 244,261 98,027 22,011 125,426
0.46
1998-1999 65,501 40,383 98,027 205,183 50,283 17,605 134,941
0.49
1999-2000 160,396 28,963 50,283 239,119 110,265 20,335 110,001
0.39
2000-2001 92,647 32,990 110,265 239,809 86,084 20,045 133,160
0.47
2001-2002 145,580 35,456 49,003 230,039 76,188 24,972 128,879
0.45
2002-2003 78,444 41,672 76,188 196,304 28,704 30,523 137,078
0.47
2003-2004 116,968 62,719 28,704 208,392 41,177 34,169 133,046
0.46
2004-2005 82,552 81,150 41,177 204,879 29,190 30,565 145,124
0.49
2005-2006 125,251 75,403 29,190 229,845 59,588 38,181 132,075
0.44
2006-2007 91,394 56,998 59,588 207,980 30,573 44,105 133,303
0.44
2007-2008 180,255 79,853 30,573 290,681 85,438 70,811 134,432
0.44
2008-2009*** 92,046 55,968 85,438 233,451 42,763 44,704 145,984
0.48

*Conversion factors from in-shell to shelled basis vary year to year for production, stocks, and exports, and were 0.45 in 1996-1997, 0.44 in 1997-1998, 0.45 in 1998-1999, 0.40 in 1999-2000, 0.44 in 2000-2001, 0.43 in 2001-2002, 0.45 in 2002-2003, 0.42 in 2003-2004, 0.44 in 2004-2005, 0.44 in 2005-2006, 0.44 in 2006-2007, 0.47 in 2007-2008, and 0.49 in 2008-2009. For imports, the conversion factor was a constant 0.50.
**Season begins in October as of 1989; prior to 1989, season began in July.
***Preliminary estimates.
Source: USDA ERS, 2010a

Imports. Most U.S. pecan imports come from Mexico, a producer of high-quality pecans (Table 3). These high-quality nuts, products of optimal growing conditions, are produced primarily in the Mexican states of Chihuahua, Coahuila, Durango, Nuevo Leon, and Sonora. It is important to note that Thailand and other countries are also important U.S. pecan importers; however, import data on individual tree nut varieties are not readily available. Instead, these countries report information on all tree nuts (e.g., walnuts, almonds, pistachios, brazil nuts, macadamias, and pecans) collectively.

Table 3. U.S. Pecan Imports, 2002-2008

Country 2002 2003 2004 2005 2006 2007 2008
1,000 lb
Australia 156 133 1,625 700 739 640 179
Mexico 60,016 72,656 91,783 88,727 87,300 81,434 87,799
South Africa 414 176 178 1,547 31 154 220
Thailand 0 0 0 381 154 0 200
Others 123 239 169 532 556 411 72
World 60,710 73,204 93,754 91,886 88,780 82,639 88,471

Source: USDA ERS, 2010a

Exports. Historically, most U.S. pecans were exported to Mexico, although the amount of lower-quality pecan imports from the U.S. for domestic consumption in Mexico has decreased in recent years. The majority of U.S. pecan exports are still destined for Mexico, although U.S. pecan exports to Hong Kong have increased dramatically since 2002 (Table 4). Pecans exported to Mexico may be imported back into the U.S. after being shelled. Further information about foreign production and trade in pecans can be found at the Foreign Agricultural Services website at www.fas.usda.gov.

Table 4. U.S. Pecan Exports, 2002�2008

Country/Region 2002 2003 2004 2005 2006 2007 2008
1,000 lb
Canada 6,951 9,392 10,775 11,150 9,566 9,379 9,576
Hong Kong 3,208 569 1,986 1,618 6,836 23,682 35,000
Mexico 17,039 19,773 32,274 12,952 40,521 29,602 43,667
The Netherlands 3,833 1,858 2,582 2,929 3,939 4,718 5,668
United Kingdom 2,989 2,744 3,538 4,343 3,239 2,793 5,840
Others 5,729 4,446 5,802 5,513 6,084 8,659 15,737
World 39,749 38,782 56,957 38,506 70,184 78,834 115,489

Source: USDA ERS, 2010a

Conclusion

The U.S. pecan industry is the largest producer in the world pecan market. Domestic pecans may go through a number of intermediaries on their way from producer to consumer, and almost all pecans are further processed, to some extent, by intermediaries. A better understanding of the channels involved in pecan marketing helps industry participants navigate the marketing challenges and take advantage of opportunities presented by this industry.

Appendix I

Table 5. U.S. Production of Pecans and Season-Average Grower Price (In-Shell Basis), 1980-2009

  Improved Varieties* Native & Seedling All Pecans**
Production
(1,000 lb)
Price
(cents/lb)
Production
(1,000 lb)
Price
(cents/lb)
Production
(1,000 lb)
Price
(cents/lb)
Year
1980 128,500 84.8 55,000 62.3 183,500 78.1
1981 174,550 64.7 164,550 43.7 339,100 54.5
1982 169,000 72.6 49,600 49.8 218,600 67.5
1983 167,250 67.7 102,750 44 270,000 58.7
1984 169,230 68.2 63,170 46.6 232,400 62.3
1985 152,500 79.1 91,900 49.7 244,400 68
1986 182,650 79.3 90,050 57.6 272,700 72.1
1987 179,650 60.1 82,550 37.7 262,200 53.1
1988 185,500 62.6 122,700 41.1 308,200 54.1
1989 161,000 78.6 73,200 53.8 250,500 71.5
1990 143,500 128 41,250 90.2 205,000 121
1991 163,300 114 115,000 83.5 299,000 104
1992 104,800 154 41,000 112 166,000 145
1993 237,100 62.9 109,200 39.6 365,000 58.6
1994 118,900 115 59,600 76.4 199,000 104
1995 174,800 112 76,800 72.5 267,500 101
1996*** 165,125 68.9 44,375 46.4 209,500 64.1
1997 202,900 93.3 132,100 53 335,000 77.4
1998 112,000 135 34,400 77.2 146,400 121
1999 219,400 101 186,700 57.7 406,100 81.4
2000 160,550 126 49,300 75.4 209,850 114
2001 246,550 66.2 91,950 41.2 338,500 59.4
2002 130,720 107 42,180 60.3 172,900 95.5
2003 202,900 110 79,200 68.3 282,100 98.4
2004 138,970 192 46,830 128 185,800 176
2005 228,650 154 51,550 108 280,200 145
2006 151,130 173 55,170 109 206,300 156
2007 302,162 123 83,143 72.2 385,305 112
2008 166,660 142 27,230 87.9 193,890 134
2009 221,640 158 68,860 69.4 290,500 137

*Budded, grafted, or topworked varieties.
**Includes Arizona, Kansas, Missouri, and Tennessee in 1989-1992; Arizona, Missouri, and Tennessee in 1993 and 1995; and Arizona, Mississippi, Missouri, and Tennessee in 1994.
***Estimates discontinued in 1996 for Missouri and Tennessee.
Source: USDA ERS, 2010a

References

USDA Economic Research Service. 2010a. Fruit and tree nut yearbook spreadsheets. Retrieved March 31, 2010 from http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1377

USDA Economic Research Service. 2010b. U.S. organic production: Table 11. Certified organic fruits. Retrieved March 31, 2010 fromhttp://www.ers.usda.gov/Data/Organic/Data/Fruit.xls

USDA National Agricultural Statistics Service. 2010a. Noncitrus fruits and nuts: 2009 preliminary summary. Retrieved March 31, 2010 from http://usda.mannlib.cornell.edu/usda/nass/NoncFruiNu//2010s/2010/NoncFruiNu-01-22-2010_revision.pdf

USDA National Agricultural Statistics Service. 2010b. Noncitrus fruits and nuts annual summary: Various years. Retrieved March 31, 2010 from http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1113

USDA National Agricultural Statistics Service. 2010c. 2008 New Mexico annual statistical bulletin: Pecans. Retrieved April 6, 2010 from http://www.nass.usda.gov/Statistics_by_State/New_Mexico/Publications/Annual_Statistical_Bulletin/2008/58_08.pdf

USDA National Agricultural Statistics Service. 2010d. Census of agriculture: Census quick stats. Retrieved March 31, 2010 from http://www.agcensus.usda.gov/Publications/2007/Full_Report/Census_by_State/New_Mexico/index.asp

Walker, K. 1965. The pecan shellers of San Antonio and mechanization. The Southwestern Historical Quarterly, 69(1), pp. 44-58.


1Pecan trees are indigenous to the U.S.; a large portion of U.S. pecans are harvested from native trees, rather than improved varieties, which have been selectively propagated to enhance natural characteristics.

2While pecan trees are not native to Georgia, the National Agricultural Statistics Service identifies some of Georgia's production as "seedling," though this makes up a relatively small portion of the Georgia crop.

3Improved varieties include budded, grafted, or topworked varieties. All pecans includes Arizona, Kansas, Missouri, and Tennessee in 1989-1992; Arizona, Missouri, and Tennessee in 1993 and 1995; and Arizona, Mississippi, Missouri, and Tennessee in 1994. In 1996, estimates were discontinued for Missouri and Tennessee.

4These channels are similar among pecan producing states of the U.S., although across the southeastern United States the role of the accumulator or "buying station" is more pronounced.


Original authors: Jay M. Lillywhite, associate professor, Ereney Hadjigeorgalis, associate professor, and Esteban Herrera, Extension horticulture specialist emeritus


Photo of Dr. Jay Lillywhite.

Dr. Jay Lillywhite is an Associate Professor in the Agricultural Economics and Agricultural Business Department at New Mexico State University. He earned his Ph.D. in Agricultural Economics from Purdue University. Dr. Lillywhite's research addresses agribusiness marketing challenges and opportunities.


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Revised and electronically distributed February 2011, Las Cruces, NM.