Pecan Literature Review

Running head: LITERATURE REVIEW 0

LITERATURE REVIEW

Name of Student

Institution affiliation

LITERATURE REVIEW 1

LITERATURE REVIEW

Introduction

The demand for America's only indigenous three nuts mostly savored in ice cream, pies or

by the handful are continuing to grow as export increases mostly in the holiday season, the trend

is witnessed for the past years. The rise in demand increases the pecan prices and motivates the

farmers to grow more and faster. The delicacy is used in many dessert companies such as Sarris

Candies, that procures about 100,000 pounds per year (Cato, 2013). This is the supporting

literature on the unique characteristics of the pecan market, that is still healthy under the

competitive free industry. As with any product, the American only tree nut prices and consumption

change according to the demand and supply. In a strategy to keep the industry alive and healthy,

the American producer must efficiently supply the market, assure a supply of quality product and

prevent waste all at a competitive price to promote stability and growth.

According to the U.S. Department of Agriculture, more than 85 percent of the world's

supply of pecans is from the United States, with the state of Georgia as the main producer. It is

followed with a 10 percent supply to the market by Mexico "Pecans | Agricultural Marketing

Resource Center", (2015). Over the last years, the supply from the U.S. has been rapidly increasing

every year. This rise in prices and demand favors the pecan growers. To maintain the prices and

demands of the market the producers must assemble, store, process and transport the product all

at a minimal cost. In this literature review, it provides the supportive literature on how the pecan

industry is performing, the structure of the pecan market, utilization of pecans, pecan exports

promotions, model data and specification and the economic characteristics of the current and future

market.

LITERATURE REVIEW 2

The next section presents the structure of the pecan industry with the main focus on the

U.S. as the main producer and distributor.

Structure of the Pecan Market

There have been many studies that examined the structure of the export demand and the

impacts of the United States export promotion program on various agricultural commodities in the

importing countries. However, the recent development in the pecan market has seen to limit the

utility of past research. The importance of pecan has raised many concerns as the current trends

are greatly surpassing the previous records. According to "Pecans | Agricultural Marketing

Resource Center", (2015), most of the U.S. agricultural exports mainly focused on the promotion

programs for poultry and meat products. Followed by fruits and fruit products according to Bailey,

(2017), tree nuts (Bailey, 2017), and lastly according to "Pecans | Agricultural Marketing Resource

Center", (2015), tobacco. Based on the earlier studies the main consumers and importers of the

products were and is the Asian market, (Cato, 2013) concluded that TEA/ MPP promotion and

advertising expenditure s in support of the United States meat industry had a significant effect on

enhancing the Japanese and Chinese demand for the U.S. based meat.

However, there are limited sources of the support of promotion and advertisement to

support the enhancement of the expenditures in influencing the U.S. based poultry or pork exports.

("Pecans | Agricultural Marketing Resource Center", 2015), estimated that demand for U.S. based

frozen products was mostly concentrated on the orange products with main exports to the European

market, United Kingdom, Netherlands, Germany, France and far east importer, Japan. Based on

U.S. pecans and Mr. Ivey data, the total pecan exports were mainly to China and was at 72.9

percent in 2016 and grew to 24.1 million dollars. However, this is not an isolated trend, offer the

past years the exports of the product to mainland China has been growing since 2007. This

LITERATURE REVIEW 3

consistency showed a growth trend over the years with a 470 percent growth from 2014 to 2015.

According to the Produce Report Global Reach (Andrew, 2017), the shelled U.S. pecans have risen

by 28.8 percent to mainland China in 2016 with over 304 tonnes in imports valued at 2.9 million

dollars.

However, other U.S. pecans global markets have witnessed fluctuating levels of growth,

the driving force behind the increasing exports being shelled pecans. The second largest market

for the produce being Europe behind Asia's China and Japan markets. From the reports, 2016 was

the best year for the U.S. based pecans with 24 percent rise in tonnage and 37 percent rise in value

for exportation to Europe in 2015 (Bailey, 2017). The rise in the commodity was largely attributed

to the increase in exports of the shelled pecan product to Germany and the United Kingdom. The

second country market in Asia is Vietnam, that comprised of 23.7 percent of the market in 2016.

However, this is a decrease from the previous year from 47 million dollars 10 2015 to 35.9 million

dollars in 2016, a significant decrease from 88.7 million dollars in 2014. The decline was a result

a decrease in imports of in-shell pecan imports, however, there is an increase of shelled pecan

(Cato, 2013).

The shelled pecan grew in 2015 from 196 tonnes to 334 tonnes in 2016, a 70.4 percent

increase margin. Consequently, a rise from 1.2 million dollars in value to 2.4 million dollars in

2016, a 98.6 percent increase. However, this increase in the exports of the U.S. based tree nut

started in the mid-90s, when they took the bold plan to introduce the product in China. However,

the rise was due to the promotion and advertisement of the product in the Pacific Rim, according

to "Pecans | Agricultural Marketing Resource Center", (2015). They found that the Chinese market

responded positively to the promotion of the product in the market. On another note, the highest

recorded pecan exports were records in 2014 that totaled 132 thousand tonnes valued at 365.36

LITERATURE REVIEW 4

million dollars (Simone, 2015). This increase was 12 percent higher than the two previous years

of 2013 and 2012. In an effort to remain competitive and increase the global market, the pecan

industry sort to form a Federal Marketing Order (FMO) in rivaling other tree nut products that

have a similar union ("Pecans | Agricultural Marketing Resource Center", 2015).

The FMO would utilize the data of the tree nut peak seasons, between October to end of

March. Subsequently, the market growers have increased the season period by incorporating better

storage methods, such as using cold storages both for transport and storage.

Pecan Consumer and Production Trends

As mentioned at the beginning of this literature the U.S. pecan is crucial to the county’s

economy. Based on the 1009 U.S. food consumers survey, the consumers prefer the tree nut to

other nuts due to the nut’s nutrition value such as the ability of the antioxidant and lipid

components mainly used for reducing cardiovascular and coronary heart diseases, according to

Cato, (2013). This as the main contributor to their globally accepted use in the dessert and ice

cream industry has seen the 2017 – 2018 pecan harvest year grow across the country including

Mexico (Simone, 2015). With close monitoring by producers and buyers on how the global market

for the pecan demand is fairing so as to see they remain to harvest a bountiful reward. For the past

decade when the product was introduced in Asia, China and Japan consumption continue to rise,

their appetite for shelled and in-shell pecans continue to rise.

The rise of exports of in-shell pecans into the Chinese market was due to the formation of

the MAP program. However, there is an increase in appetite of the tree nut from another Asian

country, South Korea. From export data from 2011, the volume of pecan imports in South Korea

have been rapidly rising and this trend continues upward (Cato, 2013). However, in 2016 it was

overtaken by the Vietnamese market which became the second largest market in Asia behind

LITERATURE REVIEW 5

China. While the pecan demand in Asia has been rising, the European region is where most of the

significant growth was witnessed. Since 2011, the exports of shelled pecan nuts have almost

tripled. However, the footprint of pecan production in other countries and in the U.S. remain small

thus, influencing the healthy significant growth of the export numbers. Consequently, the room to

expand the industry is still staggering compared to other similar tree nuts (Bailey, 2017).

Many expect prices to rise as the global demand and consumption of the tree nut continues

to rise until meaningfully more production is made accessible to quench the demand for the

product. With the time it takes to rear a pecan tree into production, the market desperately needs

producers to fill the demand gap between demand and supply. The domestic and export sales have

seen the pecan cold storage supply decline in Mexica and in the U.S., the reason is this year’s

harvest cannot support the current demand of the frozen commodity (Simone, 2015). In 2017, the

U.S. based produced geared to harvest earlier than anticipated to enter the in-shell pecan nuts

market earlier than expected to quench the demand for the product. Though there are many pecans

producing companies, however, the demand of the western-based nut rises the demand for the U.S.

based pecan nut. As the demand grows, many producers are entering the in-shell variety market

and increasing the export of the in-shell market.

Pecan Production and Prices Trends

Many farmers after a pecan harvest immediately begin to plant orchards, however, this is

not enough to quench the market demand. For decades now, the U.S. Pecan Growers Council has

been introducing pecans to the global food companies and consumers and their marketing efforts

are paying off. With the product popularity in counties such as China, Japan, Vietnam, South

Korea, India, Turkey, the EU and others, there is a potential for the rest of the world to have a taste

of the tree nut (Simone, 2015). To have a clear picture of the growing demand for the pecan market,

LITERATURE REVIEW 6

we take a look at the Chinese and Far East Asia market, this includes South Korea and Japan. The

popularity of commodities with the pecan nut is mainly popular among the middle class of this

region. According to McKinsey & Company, a consulting firm, by 2022, 75 percent of the Far

East countries’ urban population will consist of the “middle class” to compared to the 4 percent

back in 2000. With a population of over 300 million in the U.S. and the current supply of the

commodity to only China, there would be still a demand of the commodity and a demand to

increase the supply (Bailey, 2017).

According to Andrew, (2017), unless there are more lands under pecan orchard cultivation,

to manage and feed the current supply capacity. Furthermore, till more land is under the pecan

orchard production, the consumers will continue to fight over the presently available stream.

Currently, high production pecan farmers are operating and expanding at maximum, however, the

demand for supply requires more growers to enter the market to cushion the supply of the product

in the global market. As the prices go up there is the need for more in the supply section to equate

the demand. However, the current supply if having it difficult in keeping up with the rising prices

and the demand in the home market soaring. For the producers to consider the international market

there must be a surplus of the commodity in the domestic market. However, this is not the case as

they are currently trying to keep up with the local demand.

The other factor influencing the pecan supply and rocketing prices is the weakening of the

U.S. dollar as many suppliers are closely monitoring the market. With many especially the

Mexican growers holding the commodity and waiting for the high prices to rake in more from the

demand of the commodity, however, their U.S. counterparts are not bulging. The U.S. growers

maintain their supply period to the market unless faced with unfavorable weather (Andrew, 2017).

Currently, they are increasing their supply of in-shell pecan nuts into the market to keep up with

LITERATURE REVIEW 7

the demand across the globe. Furthermore, the European Union has an increasing appetite for the

shelled pecan and their buying trends in continuing to grow even after prices continue to grow.

According to the pecan report, a Chinese new year is an annual event that rivals any other festival

in the world. A large population in the business community shut their businesses for a brief two

weeks to celebrate the festival like the American's Thanksgiving.

During this festive season that lasts for 15 days, there is an increase in the purchase of

pecan-based delicacies (Bailey, 2017). Though, like their American counterparts the Chinese

purchase pecans throughout the year, however, their new year festival sees an increase in the

purchase of the commodity. Many pecan related products sellers witness a huge number of pecan

purchased and handed out as gifts. For pecan suppliers and roasters, this is the largest and busiest

event of the year. The Chinese roasters make an effort to supply the commodity in large quantities

throughout Chinese retail outlets in anticipation of the Chinese New Year holiday festival.

However, the challenge is on the pecan suppliers who must predict the commodity market supply

to quench the Chinese New Year festival pecan products demand. Additionally, they must also

balance with the demand by regular customers throughout the remainder of the year even after the

Chinese New Year Festival is over (Bailey, 2017).

The importance of all these is the pecan market continues to grow and the current suppliers

getting “dangerously low”, the prices continue to rise. The Chinese suppliers are continuously

waiting to restock the current stock to keep up with the viciously demand of the U.S. based pecans

(Andrew, 2017). With this trend, it would be an understatement to say that the previous year 2017

pecan growing season was a challenge. There were various obstacles throughout the year. There

was a record high hurricane that hit the most product pecan regions in the U.S., for example, the

Georgian growers lost over 42 million dollars in overall, with some of the producers losing over

LITERATURE REVIEW 8

80 percent of their orchards from the effects of the storm, according to (Bailey, 2017).

Furthermore, there are still pecan orchard farmers recovering from the weather damages. However,

many finished cleaning up their field and planted new pecan orchard trees and are currently

harvesting. Currently, the Money Maker (MM) and Pawnee (PAW) were the earliest varieties

ready for the markets.

The Georgian Pawnee (PAW) growers were late due to the massive cleanup after the storm

(Bailey, 2017). As the demand rose around the world, the U.S. based pecan producers are still

working round the clock to recover their supply capacity and feed the market. However, these

hardest hit regions by the weather disaster are very optimistic they will recover. One of the crucial

aspects of considering a well established a pecan orchard is the size. For a better productive result,

a 10-acre pecan orchard is recommended. The reason is that the bigger the land the lower the

mechanical costs and the higher the profits according to Texas A&M – AgriLife Extension 2013

report. The other crucial factors to consider is the limitations to nut production. After their first

plantation pecan orchards take between five to ten years to reach full commercial production. For

production, the tree will produce heavily for one year and less the next year. The plant is in charge

of its own alternative bearing; however, poor crop management can also trigger the mechanism

(Bailey, 2017).

For a pecan orchard tree to remain productive it must be maintained in a moderate

production state to continue producing the average amount on an annual basis. However, there are

many alternative management practices in practice ensuring profitable commercial pecan orchard

production (Simone, 2015). The other factor that influences the pecan prices and demand is the

mode of storage. Alternatively, there are little scholarly resources on the behavior of shelled pecan

prices and what role the pecan supply plays in influencing the pecan prices. Most of the available

LITERATURE REVIEW 9

resources are focused on the production. Since the commodity is a long-lived perennial, many

suppliers focus on the long-term investments (Bailey, 2017). They invest large stocks, hence, once

they invest in the production and distribution of the commodity they cannot commit to another

venture. This risk is viewed as a barrier to entry into the industry on a large-scale basis and thus,

many shy off the venture, hence, the limited supply of the commodity.

Pecan Marketing

Many suppliers may seek to transfer the cost of managing the commodity storage onto the

consumer thus, inflating the product prices globally. The product is classified as a specialty crop

according to the U.S. Department of Agriculture and has a niche market. Additionally, the pecan

crop is processed before it is marketed. Players in the pecan industry include shellers,

accumulators, and growers (Bailey, 2005). Growers are the small-scale farmers how to sell their

harvest to large growers or accumulators. While large farmers sell the product directly to the

shellers. The large growers can moderate what amount of crop to sell and when to sell it and can

predict the future date of a better payday. They also deliver the produce to the forward contractors.

These forward contractors dictate how much the growers will deliver. The shellers state the price

of the nuts by either detailing how long it will take to determine the price or specify the price

directly.

The accumulators are in direct contact with the small-scale growers, where they buy the

pecan produce and accumulate it until the desired amount is reached. They can be viewed as the

middlemen between shellers and small-scale growers. Some can also sell the sell pecans directly

without delivering them to the shellers (Andrew, 2017). When the pecans reach the shellers they

can now be processed. The shellers process the in-shell nuts into a sellable form of shelled pecan

products. The term shellers are the industry accepted term to refer to the commercial shellers.

LITERATURE REVIEW 10

Additionally, the terms shellers and processors are used interchangeably throughout this literature.

The pecan shellers forward contract with end users. The agreeing parties agree to deliver and the

accepted amount in a future state (Cato, 2003). The shellers benefit from the forward contracts by

having guaranteed access to the market, the probable for increased active proficiency and reduced-

price risk.

Should an unpredicted price increase occur during the rest of the marketing season, the

sheller may incur losses (Bailey, 2017). The constricting period for the sheller buyer ranges from

the fifteenth of October all the way to March fifteenth (Bailey, 2005).

The Role of the Pecan Sheller in the Pecan Market

The pecan sheller is accountable for separating or removing the pecan shell and inner

packing element from the shelled pecans (nut meat). Furthermore, the sheller performs an essential

role in the pecan trade by being the last point of sale for both commercial growers and

accumulators. Like most high-end valuable produce, pecans depend on processing before they are

marketed. 80 percent are sold as shelled pecans (Cato, 2003). Pecans require special post-

harvesting handling by the sheller, including in-shell size sorting, cleaning, grading, shelling, and

storage. The pecan storage is the most crucial part of the packaging. The pecans are semi-

perishable products and cold temperatures ensure their longevity. Improperly handled pecans

become inedible and rancid, resulting in an economic loss for the handler. Though the in-shelled

pecans can survive months at ambient temperature without going bad or losing their consumer

quality, cool storage is preferable ("Pecans | Agricultural Marketing Resource Center", 2015).

Shellers place pecans in cold storage directly after harvest because cooling helps in

preserving freshness and also avert insects from invading the harvested nuts. Shellers either

operate year-round or seasonal basis. Seasonal shelling coincides with the harvesting season each

LITERATURE REVIEW 11

fall. The stored pecans especially, shelled pecans carry the pecan industry as a whole because

shelled pecans are subject to trade ("Pecans | Agricultural Marketing Resource Center", 2015).

Prices paid to the sheller dictate prices paid to the growers. Factors such as total supply, the

expectation of crop size and demand are crucial in the global prices. For example, opportunities

drive buyer disposition to accept sheller asking prices and sheller prices presented to growers.

Likewise, a short crop year results in higher prices and a large crop year reflects low prices.

Additionally, high pecan prices will result in reduced pecan demands (Simone, 2015). Prices

received by shellers and growers determine, in the long run, changes in the pecan industry.

However, the demand levels have been stagnating in the recent years, thought the prices continue

to rise steadily. The stagnation has led for the pecan producers to model ways to increase the

demand. New storage techniques make it easier to store and produce pecan products similar to

those of other nuts such as peanuts. However, the pecan farmers must sell their products in the

shortest time while the product is still fresh and in abundance. Alternatively, this is not a constraint

to producers as the prices still remain favorable. Furthermore, there are economic factors that

influence the prices such as the size of the Mexican produce. There are different prices for new

improved versus native pecan supplies, stocks, and prices of the native tree nut (Bailey, 2005).

The other factor that makes the tree nut more valuable is their consumption rate. The pecan

product makes 40 % of the total tree nut consumption globally ("Pecans | Agricultural Marketing

Resource Center", 2015). They are placed after walnuts and almonds based on consumption.

Though the native American consumption has stagnated the global market has been increasing.

However, to maintain this balance the global sellers must maintain the current high demand but

not too high to make the market search for alternative products due to price and availability.

Summary

LITERATURE REVIEW 12

In conclusion, from the extensive literature presented the pecan industry is a versatile

market and shows potential to continue for a long time globally. The United States remains the

leader in pecan production and distribution globally, followed by Mexico. The main production

states include Georgia, New Mexico, and Texas. In relation to the native pecan production Texas

is the leader and highest producer. Additionally, native prices are traditionary lower than for the

improved variety. Furthermore, both of these prices are followed by a cyclical pattern in relation

to pecan production. A review of the literature was found that a conjoint analysis can be concluded

in several ways to reveal how increased consumer taste for pecans in foreign countries has

influenced U.S pecan markets. The main factor was the consumer preferences towards different

product attributes. Other factors influencing the global demand and supply for the pecan and pecan

product the nature of the product and how it is stored.

The review of literature also gave how the products prices are influenced and why the

increase in still projecting upwards. The literature reviewed different information sources to

present the supportive argument. From the research, it was found that there two main pecan

products preferred by the consumers, these include the shelled pecan and the in-shell pecan. The

global pecan preferences were for the U.S. grew native pecans, large pecans, and pecan halves. It

was found the consumer were heterogeneous in their preferences for the American based breed

mostly from Texas and homogeneous towards other U.S. based varieties. There was one trend in

the consumer preference globally, the European and Far East regions continue to grow the demand

for the America pecan products. As the pecan industry progresses with new emerging markets in

Europe and Asia the prices, costs of production and global supply numbers will change.

The current global estimation of the pecan industry is at 50 billion dollars annually estimate

for the U.S. producers and the demand in North America, Europe, and Far East Asia will change.

LITERATURE REVIEW 13

However, the largest market China continues to grow. Most of the sales were to China. In 2011,

the Chinese market alone imported 192 million dollars’ worth of in-shell pecans. The main

importers of the American based shelled pecans are Europe and Canada, with 30 percent of the

imports going to the Canadian market according to the “Pecans | Agricultural Marketing Resource

Center", (2015). The production of the tree nut is based in the southern regions of the United States.

However, in the past year, the region was largely affected by the toughest weather disaster,

hurricane. The production from America experienced a setback, however, the global market

continued to demand the American product.

The weather condition setback coupled with the low carry-in inventories caused the pecan

prices to sow by as much as 20 percent for the large kernel and blend pecans (Bailey, 2017). With

the Chinese New Year earlier 2018, the pecan producers are optimistic the market with recover

and their supply to the global market will improve.

LITERATURE REVIEW 14

References

Andrew. (2017). U.S. Pecans to Continue Strong Export Growth to China | China Fresh Fruit and

Produce News. Producereport.com. Retrieved 28 February 2018, from

http://www.producereport.com/article/us-pecans-continue-strong-export-growth-china

Bailey, M. (2017). China Pecan Inventories Very Low. pecan Report. Retrieved 28 February 2018,

from http://www.pecanreport.com/news-blog/2017/9/28/china-pecan-inventories-very-

low

Bailey, M. (2017). Pawnee (PWN) Pecan Prices Start Strong. pecan Report. Retrieved 28

February 2018, from http://www.pecanreport.com/news-blog/2017/10/5/pawnee-paw-

pecan-prices-start-strong

Cato, J. (2013). International demand for America's pecans drives the surge in

prices. TribLIVE.com. Retrieved 28 February 2018, from

http://triblive.com/business/headlines/5062850-74/pecan-pecans-prices

Lillywhite, J., Simonsen, J., & Heerema, R. (2015). U.S. Consumer Purchases and Nutritional

Knowledge of Pecans. Horttech.ashspublications.org. Retrieved 28 February 2018, from

http://horttech.ashspublications.org/content/24/2/222.full

Pecans | Agricultural Marketing Resource Center. (2005). Agmrc.org. Retrieved 28 February

2018, from https://www.agmrc.org/commodities-products/nuts/pecans/

Pecans | Agricultural Marketing Resource Center. (2015). Agmrc.org. Retrieved 28 February

2018, from https://www.agmrc.org/commodities-products/nuts/pecans/

Simone, A. (2015). The Chinese went wild for American pecans — which may be bad news for

wild pecan trees. Public Radio International. Retrieved 28 February 2018, from

LITERATURE REVIEW 15

https://www.pri.org/stories/2015-04-17/chinese-went-wild-american-pecans-which-may-

be-bad-news-wild-pecan-trees

Place new order. It's free, fast and safe

Paper type

Deadline

Page count

550 words

Total price: $ 15.00

Our customers say

Jeff Curtis

USA, Student

"I'm fully satisfied with the essay I've just received. When I read it, I felt like it was exactly what I wanted to say, but couldn’t find the necessary words. Thank you!"

Ian McGregor

UK, Student

"I don’t know what I would do without your assistance! With your help, I met my deadline just in time and the work was very professional. I will be back in several days with another assignment!"

Shannon Williams

Canada, Student

"It was the perfect experience! I enjoyed working with my writer, he delivered my work on time and followed all the guidelines about the referencing and contents."