The Chicoms Are After Our Nuts!

Pecans are as all-American as anything can be. Washington and Jefferson grew them. They are the state nut of Arkansas, Alabama and Texas. The U.S. grows about two-thirds of the world's pecans and eats most of them itself.
For generations, pecan prices have fallen with bumper crops and soared with lousy ones. But lately, they've only been going up. A pound of pecans in the shell fetched $2.14 on average last year, according to the U.S Department of Agriculture, nearly double what they brought three years earlier.
The reason: The Chinese want our nuts.
Five years ago, China bought hardly any pecans. In 2009,
China bought one-quarter of the U.S. crop, and there's no sign demand is abating.

Pecans offer a case study in how China is reshaping entire industries for its trading partners—and not only by
exporting goods made by its low-wage workers.
Nearly $1 of every $5 China spent on U.S. items last year went to buy food of some sort, $16.6 billion worth, according to the U.S. Department of Commerce. U.S. exports of goods of all sorts to China more than doubled between 2005 and 2010. Exports of crops and processed foods—soybeans, dairy, rice, fruit juice—more than tripled. Exports of pecans rose more than 20-fold.
"What's changed in our business?" asks second-generation pecan merchant and sheller George Martin, president of Navarro Pecan Co. in Corsicana, Texas. "The Chinese entered…and they have been getting bigger and bigger and bigger."
The dynamics are simple. "We're in a situation of finite supply and seemingly infinite demand," says Thomas Stevenson, a Georgia pecan grower and merchant. Eventually, more trees will be planted, but a pecan takes eight to 10 years to bear fruit.
For now, life is good for pecan growers, who produce about $550 million a year worth of nuts at today's prices.

While China's appetite for pecans has been a windfall for growers, it poses a challenge for pecan shellers—the middlemen who separate nut from shell and then sell the insides to food companies, grocery stories and direct to consumers. For some shellers, the trouble is simply getting the nuts they need before the Chinese buy them. For others, it's about coping with volatile prices to avoid profit-reducing squeezes.

For bakers and ice cream makers, it's all pain. "It's certainly not very pleasant," says Bob McNutt, president of Collin Street Bakers, also of Corsicana, which has been selling pecan-packed fruitcakes for more than 100 years. About three-quarters of Mr. McNutt's sales are from fruitcakes, and 27% of the weight of each fruitcake is pecans. Prices of the pecans he buys are 50% higher than any previous peak. Customers, he says delicately, "are not going to be willing...to participate in absorbing the cost."
In September, though, Collin did raise the price of a 1-lb., 14-oz. deluxe fruitcake by $1.10, or 4.8%, to $23.95, before shipping costs. Mr. McNutt says he'll decide in May whether to increase prices again. He worries that if he boosts prices too much, sticker shock will lead some customers to go without fruitcake next Christmas.

With the Chinese buying so many nuts, exports to other markets have been crowded out. Some domestic buyers have had trouble getting the sort of nuts they want. One sheller went under last year; its plants were sold to the King Ranch, the big closely held Texas agribusiness that got into the pecan business by acquisition in 2006. Another sheller told customers in November it couldn't honor its contracts.

At Navarro Pecan, Martin frets that if prices keep rising, Americans will simply make fewer pecan pies. At today's grocery-store prices a pecan pie takes between $5.50 and $7.50 worth of pecans, depending on the recipe.