The Pecan

by James McWilliams

  By the late 1980s and early 1990s, however, a sharp departure from this customary consumption-supply symbiosis occurred. Supply began to outpace demand. The potential reasons for this growing disparity were numerous. One factor may have been the decision by American cereal makers to switch to walnuts, which experienced a boom in production in the late 1980s and a drop in price. Another may have been the maturation of the unusual number of pecan trees planted in the 1980s that were now reaching commercial levels of production (thus spiking supply in a short span of time). It was also possible that candy makers were starting to choose almonds over pecans because almonds were coming to be thought of as less oily. “Pecans,” explained one industry observer in 1994, “bleed through chocolate.” It is also possible that the tough economic climate of the early 1990s led many people to gather wild pecans and sell them to suppliers (almost a quarter of commercial nuts in the early 1990s were bought from pecan wildcatters), thereby creating an overall domestic supply of inconsistent quality (this is not to suggest that wild pecans taste worse than domesticated ones; the two simply have different qualities). Some analysts speculated that pecans were losing ground against other nuts because of poor marketing efforts. The pecan industry, after all, was not vertically integrated, and with its relatively weak marketing organizations it could not attract consumers with its version of the dancing peanut equipped with top hat and cane.2

  Whatever the reason, or combination of reasons, there was no avoiding the conclusion by the middle of the 1990s that the pecan industry had hit a rough patch for the first time in its young history. Industry analysts complained that the pecan was “an infrequent visitor to northern kitchens” and that the pecan business “never got its act together.” Others lamented that the pecan was so poorly promoted that all the industry could point to as an example of successful marketing was a shout-out to pecans given by Today Show weatherman Willard Scott. The problem, however, had little to do with marketing efforts, or a lack thereof. The problem with the pecan industry, and the underlying cause of its slump, was that the improved pecan was such a newly cultivated nut. While demand had reached a point at which a uniform supply mattered a great deal to processors and commercial consumers alike, pecans had yet to be accordingly standardized. The reason for this divergence was that there were still too many wild pecan trees from which to gather nuts. One report put it this way: “The organized scientific pecan growers have had their impact on the industry, but the input of individuals gathering odd-lots of the nuts in bags and cans remains strong.”3 This input, many believed, would have to be curtailed.

  In many ways, though, the commercial bias against the wild pecan was shortsighted. As suggested, the persistence of wild pecans maintained genetic diversity that, in turn, discouraged disease and insect infestation. Wild pecans, moreover, were much less labor-intensive and did not require systematic applications of pesticides. Nevertheless, the heroic strides taken toward rationalized cultivation led industry leaders to believe very deeply that there were still too many farmers who passively cultivated pecans with the same methods employed by their ancestors hundreds of years earlier. These nuts, and the trees that produced them, were, it was thought, starting to disrupt the industry, primarily because the industry had tapped markets for which consistency, uniformity, and predictability—all qualities harder to achieve with wild nuts—now mattered more than ever before. One report described the stream of wild nuts making its way into the commercial pecan supply as marked by “poor kernel fill, rancidity, excessive particles and dust, and dark color.” It should be noted that this was a novel problem. It was hard to find another commodity in which fruit from farms with tens of thousands of top-quality cultivars was intermixed with fruit from wild relatives picked by scratch farmers. For most of the cultivated pecan’s history, such intermixing was inconsequential, if not beneficial for the industry as a whole. Now, however, the consequences were obvious. Producers were caught unprepared.4

  As the market for pecans expanded, wild pecans started to create trouble for reasons beyond their own collective inconsistency. When the high-end cultivars grown on mechanized farms were mixed with wild pecans—as they always were for distribution purposes—the results could cause difficulty downstream in the supply chain. Wild nuts, the diverse products of nature, were harder to sort and grade in a human-designed system since they often did not conform to grading gauges. Wild trees were also more likely to mast inconsistently, making it difficult for marketers to predict supply—something that was much easier to do when you could count cultivars planted and make estimates based on established annual masting records. The mixture of wild and cultivated nuts had the added effect of driving up prices for some commercial consumers while depressing them for others. Consumers who demanded the highest-quality pecans—say, makers of frozen pecan pies—would have to pay more because shellers would store and sell the cultivated pecans separately from their wild cousins. Those who could get away with using wild pecans—namely ice cream makers—would enjoy prices based on the overall, rather than the cultivated, cost of pecans, thereby lowering returns to farmers. This inconsistency made the industry a “highly speculative” one for agricultural investors. Finally, wild pecans—because they were not sprayed—were more susceptible to fungal outbreaks that could not only further destabilize supply but also pose a threat to cultivated varieties.5

  For all these reasons, by the late 1990s industry observers were anything but optimistic about the future of the American pecan industry. “The pecan market,” predicted the trade journal Candy Industry in 1994, “will continue to remain soft and prices are declining.” Two years later, a report by the USDAs Economic Research Service came to the same conclusion, explaining, “Pecan prices are likely to remain weak.” Meanwhile, efforts to keep wild nuts out of the supply chain came to naught. When the Pecan Marketing Board initiated an effort to tax wild nuts entering the supply chain, local pecan wildcatters erupted in outrage. One resident of San Saba, Texas—the veritable epicenter of wild pecan groves—told the Wall Street Journal that, although she wanted to support the tax, “there would probably be 10 pickups trying to run me over” if she did. Given this response, one could have looked at the pecan industry in the 1990s and concluded that it had had its run and that the pecan was a crop best left to sow its wild oats and revert to its uncultivated status.6 Many people thought that was exactly what should have happened.

  An optimistic observer of the industry during the dark times of the 1990s might have surmised that two things needed to happen in order for the pecan business to recover and thrive. First, given the fluctuations in price and supply, new markets, preferably large foreign ones, would have to open up. Second, under export pressure, pecan growers would have to start supplying shellers and distributors with more-uniform batches of nuts. All of this would seem to have been wishful thinking. Remarkably, however, that’s exactly what did happen. Few analysts could possibly have predicted, even in their most glass-half-full moments, that the market that would eventually emerge to rescue pecans—China’s exploding middle class—would be the largest market imaginable. Nor could they have predicted that the region of the United States that would move to supply the Chinese market—namely, the arid western portion of the country—would lack wild varieties altogether, thus necessitating a supply of consistently improved varieties and an industry that to this day is booming as a result of an immensely popular and profitable China connection.

  A market as lucrative as China does not fall into an industry’s lap. Efforts to reach export markets began in earnest in the mid-1980s. The Southern United States Trade Association and the Western United States Agricultural Trade Association (USDA programs) began to actively promote pecans in European markets, especially in the United Kingdom and Germany. These efforts included $490,000 in funding from the Targeted Export Assistance Program (also a USDA program) and another $1.5 million from the Farmers Market Promotion Program. A modest contribution, $233,329, also came from the Market Acces
s Program. These funds helped to support a tentative entrance into European markets, especially the UK and Germany. Despite these efforts, most pecan exports still went to Canada and Mexico (primarily to be shelled and sent back to the United States) until the 2000s. The vast majority of pecans continued to be consumed where they had always been consumed: on the home front. Writing in 1998, one analyst noted that “pecan exports have experienced slow growth and are a minor share of supply,” about 20 percent. For a variety of reasons—but mainly because almonds and walnuts were cheaper and more appreciated in Europe—the European market would always remain a tough nut to crack for pecan exporters.7

  Another market that U.S. pecan producers tentatively tapped was Japan’s. With Hong Kong imposing no restrictions on pecan imports, that city served as a logical re-export point to Japan, where pecans had become something of a delicacy since they were first introduced in the 1970s. Even with Japan’s rising middle class and growing population, though, pecans were never able to do any better there than they did in Europe. The higher classes enjoyed them as a complement to tea, but interest from the population at large was low. Commenting on the lack of popularity of pecans in Japan, the president of the Toyo Nut Company in Kobe said, “It’s like horse racing; almonds, walnuts, and pistachios are already ahead.” The supply-demand disparity that came about in the 1990s thus persisted into the early twenty-first century, with these initial efforts coming to naught.8

  The big break into the China market by the United States took place at a 2006 trade show in Paris. It was then that an official from New Mexico’s Department of Agriculture, on a lark, introduced a team of buyers from China to a batch of large, unshelled pecans. The Chinese cracked them open, sampled them, and were intrigued—so intrigued that they traveled to New Mexico to meet growers, tour orchards, and discuss tentative contracts. New Mexico pecans appealed to the Chinese because, as one report put it, “the quality from natives isn’t as good as the improved varieties that make up all of New Mexico’s crop.” In other words, the Chinese—no matter what the consequences for the American nut—wanted cultivated nuts. After the Chinese visit to New Mexico, the director of marketing for the state’s agriculture department told a Lubbock, Texas, newspaper, “We think there’s potential for tremendous growth.” That turned out to be an understatement. Three years later, the Chinese were consuming more than a third of the 315 million pounds of pecans harvested by New Mexico farmers.9

  This “explosive consumer demand,” as one trade industry magazine put it, was unprecedented in any industry, much less in the inchoate pecan business. The statistics tell the story of a rapid change in fortune for an industry that had fallen into the doldrums. In 2000, China did not even have a word for “pecan.” The country imported no pecans; no one ate them. In 2003, China imported less than a million pounds of pecans. In 2008, a year after the United States had a bumper crop of pecans amid a worldwide shortage of walnuts, the Chinese purchased 53 million pounds of pecans. The following year they bought 83 million pounds—out of a total of 300 million pounds produced in the United States. This amount was more than all other pecan exports combined. Between 2009 and 2010, pecan exports leapt by 61 percent, with more than half of U.S. exports going directly to China. The trend dipped a bit in 2011, but generally looks to continue strong. In 2005 China accounted for less than 1 percent of the overall U.S. crop; in 2011 it bought 27 percent of the U.S. crop. New Mexico, which benefited the most from the Chinese market, watched exports go from 600,000 pounds in 2005 to 15 million pounds in 2010.10

  Growers were, and continue to be, thrilled with this turn of events. Prices of pecans skyrocketed under the pressure of Chinese demand. Georgia orchardists—who mostly produce improved varieties—were actively courted by Chinese importers. “The Chinese,” explained one newspaper report, “have been cold-calling even small growers to obtain supplies.” This was no overstatement. “A month before harvest,” said one grower, “your e-mail fills up, you get phone calls. One of our best Chinese customers called my partner at 2 a.m. looking for nuts.” Pecan prices obviously went haywire. With the Chinese middle class willing to pay $10 to $15 a pound for large, unshelled pecans, prices on the domestic front were bound to spike. In 2008 pecans were retailing around $3.50 per pound. By 2010 the price was at $6.95. In 2011, one could easily come across bags of shelled pecans selling for $9.30 a pound. The value of pecan orchards rose from a range of $3,000-$3,800 an acre to $4,500-$6,000. For those on the right side of this boom, times had changed. “It’s a good thing,” said the owner of one New Mexico pecan farm. “It’s a very good thing.”11

  The Chinese interest in pecans was driven not only by a decline in the global walnut supply and the emergence of a Chinese middle class with enough disposable income to splurge more than occasionally on $9 bags of pecans. China was undergoing something of a health craze as well, and pecans were widely recognized for their health benefits. “We used to eat walnuts,” explained one Chinese woman to a reporter, “and then we saw on TV that pecans were more nutritious than walnuts.” She added, “Pecans are very good for the brain, and we older people should eat more pecans so that we don’t get Alzheimer’s.” A New Mexico grower, when asked to speculate on this explosion in Chinese demand, explained that the pecan is a great-tasting nut, adding (about the Chinese), “They also think it’s very healthy for you.” The pecan industry was diligent about playing up this aspect of the nut. A former head of the Georgia Pecan Growers Association reminded Chinese consumers: “as healthy as the pecan is, as the number one nut in antioxidants, you’d have to eat three times the amount of almonds to compare to pecans.” The Chinese had a unique way of eating pecans: they partially cracked the nuts, soaked them in brine, and roasted them, eating them like others eat pistachios. “The pecan,” explained one somewhat bemused U.S. pecan importer, “has become associated with longevity.”12

  The Chinese market transformed the American pecan industry in less than a decade. In 2005 pecans were a novelty item in China. Today they can be found, as one newspaper reports, “at gas stations, airports, and every grocery store in China.” The impact of hundreds of millions of new consumers suddenly swarming to consume American pecans is hard to capture in its entirety, but a few changes stand out. First, China’s demand for large pecans of uniform quality meant that states with wild pecans—such as Texas and Louisiana, which once dominated the industry—quickly lost ground to states that grew only cultivated varieties, such as Georgia, Arizona, and New Mexico. Second, because the Chinese demanded pecans in the shell and imported them directly through Vietnam (to save on direct import costs), shellers and distributors in the United States also fell on hard times. The pecan industry is not and never has been vertically integrated, leaving the downstream components of the industry especially vulnerable to Chinese demand. Third, the dominance of the Chinese market drove up the price of pecans at home. As a result, not only home consumers but also the industries that spent the 1960s and 1970s turning cheap chopped pecans into every food possible—ice cream, pies, muffins, etc.—were being priced out of the pecan market. As America’s native crop boomed, Americans were eating less and less of their own homegrown nut. Today you do not find pecans in processed foods nearly as often as you once did.

  Industry leaders have expressed considerable angst about this last development. Assessing the meteoric rise in pecan prices, Jeff Worn, vice president of the South Georgia Pecan Company, a distributor to Russell Stover and Sara Lee, has been the most outspoken about the dangers of yielding too much market share to the Chinese. “In an already suffering economy,” he wondered, “how long will people be able to pay that much for pecans?” Speaking on CNN Money, Worn continued, “Pecans are a staple here in the United States and I hope that with current household income under pressure we don’t price ourselves out of the market.” In the spirit of this concern, several growers declared their loyalty to their domestic clients. As a Texas grower told the Fort Worth Star-Telegram, “I’m very keen on keeping it l
ocal.” The idea of the local certainly has great sway, but at the end of the day, it seemed that another kind of logic had prevailed. One giddy Texas grower explained to the Wall Street Journal where and when he would sell: “I’m going to wait,” he declared, “till the price gets higher.”13

  Another reason that many observers are wary of alienating domestic consumers as the industry becomes addicted to Chinese demand is that the Chinese, who are currently buying agricultural land throughout East Africa, could always start building their own pecan orchards. They do, after all, have more than a passing familiarity with locally grown Asian hickories. While it would take decades for them to even come close to matching American levels of pecan production, the possibility nonetheless remains that the Chinese could viably pursue pecan production. It is perhaps for this reason that American pecan marketers are trying to stay a step ahead of the game by exploring a potentially even more lucrative market: India. Jeff Worn might have been genuinely concerned about protecting the domestic market from skyrocketing pecan prices as a result of foreign demand, but he was not going to miss out on the emergence of another potentially huge overseas market. In July 2011 National Public Radio found Worn after he had attended a trade show in India, where he was hoping to introduce pecans. “We were cooking pecans with rice and things like that at the booth,” he explained. “And people really ate it up.”14

  The China connection, as well as an impending India connection, highlights a bittersweet reality for the pecan industry. For better or worse, survival in the commercial pecan business now depends on managing increasingly expansive orchards with ironclad efficiency to meet broadening market demand. Without the presence of substantial wild nuts, humans, through careful methods of management, must work to expand scope, minimize the vagaries of nature, routinize the processes of production, and transform orchards into the outdoor equivalent of assembly lines. One could argue that the process of bending nature to the will of humans to meet market demand has been happening with pecans since the origin of Antoine’s grafted Centennial pecan. That would be true.