NMSU: Extension Publication Listing - Z-307
NMSU branding

This publications is also available as an ebook. See all ebooks.

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.

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



To find more resources for your business, home, or family, visit the College of Agricultural, Consumer and Environmental Sciences on the World Wide Web at aces.nmsu.edu

Contents of publications may be freely reproduced for educational purposes. All other rights reserved. For permission to use publications for other purposes, contact pubs@nmsu.edu or the authors listed on the publication.

New Mexico State University is an equal opportunity/affirmative action employer and educator. NMSU and the U.S. Department of Agriculture cooperating.

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