Episode 2 - The Economics of Pecan Production

In the second episode, Dr. Lenny Wells of the University of Georgia Department of Horticulture, provides pecan growers a strategy for overcoming the greatest challenge in growing and producing pecans -  the continued increase in the costs of production. The episode also entails an interesting history of both domestic and international pecan markets as well as the development of the current grower and sheller industry.

Transcript

SPEAKER_01 0:09

Whether it's pecan or pecan, we cover it all. Orchard management, growth and development, pest management, economics, from extension specialists, scientists, county agents, industry representatives, and growers. Brought to you by the University of Georgia Pecan team. In a nutshell, the Pecan Podcast. All right, welcome to episode two, in a nutshell, the Pecan Podcast, the economics of Pecan Production. I'm Andrew Saw, your area agent in Southeast Georgia. And I'm Lenny Wells, Extension Specialist for Pecans at the University of Georgia. We are your hosts. So, Lenny, this is our second episode. I'm glad to be back with you. And I got a question now. You know, we want listeners, we want it to be growers, but we want to also make it where if anybody else is listening, a consumer or somebody who doesn't know ag, they can understand a little bit about what we're talking about. So before we dive into the true economics, I love the history. And I just want you to tell me this. What happens when a pecan grower harvests and sells those pecans?

SPEAKER_00 1:32

What happens? Yeah, so most growers, of course, know this, but basically, the grower harvests his crop, he'll take it to the cleaning plant, get all the nuts separated from the sticks and leaves and trash and all that, and then they're bagged in big super sacks. And usually they're either sold, you know, from the grower directly to uh we have a lot of small accumulators uh all over the state. And a lot of times those accumulators will sell to large accumulators, some of them exclusively to a large accumulator, or to others as well. But so you have small accumulators, then large accumulators, and then those large accumulators usually are selling to a sheller. And the sheller takes the crop, shells it, packages it, and sells it to like the Walmarts and the Costco's and the big buyers at the end of the chain. Yeah. And so just to give a little historical context, and this is the way it's been for decades and decades and decades, really since pecan the pecan industry took off. So to give a little historical context of how the economics of pecan production has looked over the years, I'm going to go way back. I went and looked up pecan prices. And when pecan, a pecan farmer sells his crop to whoever he's selling it to, whether it be the accumulator or to the sheller, whoever, yeah, he's selling an in-shell product. So this is the pecan kernel inside the shell. So I'm giving in-shell prices here. And you know, this goes all the way back to 1922. So in 1922, the price of pecans was the average price of in-shell pecans was 45 cents per pound. And then, you know, it dropped actually during the Depression. So in 1932, it was 13 cents a pound. Okay. 42 it was 18 cent a pound. And 52, 25 cent a pound, 62.37 cent a pound, 72, 47 cents a pound, and then 82.66 cent a pound. So in all that time, from 1922 to 1982, the average price ranged from only 13 cents a pound to 66 cent a pound. So unreal. We grumble about prices now. That's pretty bad. I was thinking that the whole time. So your your your cost of production, of course, was much less at that time. Were we even irrigating back then? Uh you didn't really see a lot of irrigation starting up until probably the 80s, somewhere in there. There may have been some here and there, but it wasn't widespread. Even as late as 1989, the price was like 70 cents a pound. Something happened in 1990, and I hadn't been able to trace back exactly yet what that was. But so in 1990, the price jumped from 70 cents a pound in 1989 to $1.19 in 1990. So right in that time period was kind of the first time it got above a dollar a pound. And so then for quite a while, it kind of fluctuated, you know, some depending on the size of the crop and that type of thing. So in 02, it was a dollar two a pound. And then 10 years later, 2012, it was a dollar ninety-one a pound. And we know what happened during that time. Well, that was actually when I started extension. So this will be more familiar to me, but I want to hear you explain this to us. Well, uh, let me also go back. So in in night in 2002, the price was a dollar two, dollar and two cents a pound. The cost of production in 2002 was eight hundred and fifty dollars an acre. Wow. So hold on to that number. Yeah. We'll get back to that in a minute. But in 2009, China bought nearly one quarter of the entire US pecan crop. Okay. Five years earlier, 2004, they only bought two million pounds. And so there was a huge increase. And what happened was this is the this is the story of what happened, as it's best it can be determined. In 2007, we had a huge pecan crop in the US. And this kind of coincided with one of the shortest walnut crops that we've ever had in the country. So for the first time, the price of pecans fell below the price of walnuts. And some people in the the nut industry say this is kind of akin to price of gold falling below the price of silver. You know, it's kind of how they relate it. So there was a big opportunity there for China to buy, who was already buying tons of walnuts, uh, this was a big opportunity for them to try pecans. So they jumped in in 2007 and bought 47 million pounds of pecans from the U.S. Now we that's three times as much as they bought the previous year. Now we produce in the U.S. on average somewhere around 300 million pounds of pecans. So that gives you an idea of how much of the crop they're buying. 2009, they bought a quarter of the crop. And so the industry, recognizing this opportunity, started aggressively marketing pecans in China. Grow, you know, a lot of farmers were going over there through some of the pecan organizations in the in the country, in the different states, you know, started sending people over to market pecans. Now, one thing this did, China, one this is a big key point. China was buying in-shell pecans. They weren't buying pecan kernels. So the grower could sell directly to a Chinese buyer if they could make that connection, and a lot of the large growers did. But more often than not, even the small growers could sell their in-shell crop to one of these accumulators, and those accumulators sold directly to the buyers in China. And because they were basically cutting out that middleman, cutting out the sheller, and selling that in-shell crop, the farmer automatically got a lot more from the crop. That's why we saw the big price increase during that time. And just to give you a rundown of that, I mean, in 07, you know, there wasn't a this was the first time they bought when the 07 market started, you know, I don't think anybody was really that aware of this. So the price was not that much different. It was $1.06 per pound. 2008, it was $1.44 a pound, 2009, $1.32, and then 2010, when things were really rolling with China, the price of pecans got up to two $2.17 as the average price. 2011, it was two dollars and sixty-five cents a pound was the average price of pecans in Georgia. In 2012, $1.94, 2013, $1.96, 2014, $2.34, 2015, $2.18. So you can see it hovered right there around $2 as soon as China got in the market. And one of the issues with this is, you know, that's the average price that I was providing there. You also had some varieties, say Pawnee, for example, during that time period, Pawnee was consistently over $3 a pound. Yes. You know, I think the highest I remember hearing was around $3.40 a pound for Pawnee. Yes. Um, Pawnee is the earliest harvested nut, so it always brings the highest price. So things were looking good for pecan growers at that time. Lenny, what did that do to our state in terms of growers in production? So for the first time in a long time, growers, and we've been hearing from shellers for years, we need y'all to plant more pecans. You know, we need more pecans, we need y'all to plant more acreage. But nobody had any money to plant more acreage. Then when the price jumped like it did when China got in the market, suddenly everybody had money to invest back into their operation. And so we had existing growers planting more acreage. We had new growers coming in planting more acreage. And so during that time period, basically from 07 to let's say to 2018, our acreage jumped from you know about 140,000 acres in the state of Georgia to over 200,000 acres in the state of Georgia. But you still have this link in the chain of the pecan market where you have a sheller. And for people to buy pecans here in the U.S., the sheller has to shell that crop and sell it. Because most of the time, even today, most growers don't want to fool with shelling the crop and selling it to an end user. You know, they want to sell their crop in bulk to someone because they a lot of times they're going to need the money. And so when we were selling at those high prices to China, the prices got a little too high. And we had a lot of U.S. shellers that could not really compete with at those prices, and a lot of them went out of business. And so now we're down to where we only have just a handful of shellers. I mean, I'm maybe like five big shellers in the U.S. Right to buy the crop. And so now there's pressure on them to come up with the money to buy the crop. And they're under financial strain, just like the grower is, and so it's created some issues in the industry because you've only got a few people to buy that big crop. And so one thing that happened, of course, is 2018 when the tariffs kicked in, just immediately that uh you know market to China was was pretty much gone. And the price dropped from you know somewhere around 230, 240 a pound in 17, down to like a dollar seventy-five uh in 2018. And you know, it's kind of hovered, you know, it got down in 2020 to as low as $1.43 was the average price. But it's kind of hovered, you know, in that range since that time. You know, last year, I think the average price was probably somewhere around $1.85, maybe even $1.90. But, you know, it's kind of it's been lower than $2. And really what we see now, we'll talk about more of this in a minute, with the cost of production, what it is today, we really need that $2 a pound or more for growers to to make it really. But we will talk more about that in just a minute. But that's kind of a a quick overview of the industry and and the economics of it and what what growers and and shellers are are looking at.

SPEAKER_01 12:18

And it's it's what's you know, kind of put the industry where it is today. And just looking at this right now, let's look at our budget online that is done through our Department of Economics. And if I look at the take the state average yield, and then I look at the price that we got for last year, maybe $1.85 or $90, like you were saying, and then compare that to our variable cost of production, you know, just making it through the year. And Lenny, this is a good conversation because the state average versus the cost, I'm in the hole per acre.

SPEAKER_00 12:54

How do how do we look at this? So let's talk about that, what you mentioned about the the state average yield. So, you know, as I mentioned, Georgia probably now is hovering somewhere around you know, with the hurricanes we've had and and that kind of stuff, you know, we're probably now looking at somewhere around 180,000 acres, somewhere in that range. And so if you look at our state average yield on paper, it doesn't look that great. So so the five-year average yield from 2018 to 23 was 723 pounds an acre, which is not doesn't sound that good. Yeah but that it that takes into account orchards that are well managed and getting everything they need and have really good production, and also those orchards that are kind of halfway done and don't have very good production, and so that's kind of an average of those. But you know, I would say in a commercial orchard, realistically, you're looking at somewhere between 800 and 1,200 to 1,500 pounds an acre average on the high end. If you look at on paper our average yield, it doesn't look that good because we have such a wide range of you know yard trees all the way up to thousands of acres of production by one grower.

SPEAKER_01 14:12

So a possibility there that depending on what varieties we plant, that number could actually be more favorable to the grower if I'm just looking at state average. So that helps, in other words, your explanation helps separate that.

SPEAKER_00 14:26

Yeah, and and what we need is varieties or cultivars that will have the potential to produce, you know, 1,500 to 2,000 pounds an acre as opposed to 800 to 1100 pounds an acre.

SPEAKER_01 14:40

And we do have that, but that does help separate, you know, why our state average looks like it does. It does consider all the trees. We still have another enough older varieties out there, you know, that probably aren't that that aren't really adding a lot to that that average yield.

SPEAKER_00 14:58

We've also got a lot of old varieties in the state and a lot of old trees. You know, pecans have been grown in Georgia commercially for a hundred years or more. So we have a lot of trees that are 100 years old that are still in production, and they'll still produce when they reach that age, but your alternate berry is going to get a lot worse. Those trees get stressed a lot easier, so their production on average is usually not as good as a younger tree. A lot of those older trees that are under various levels of management, and that certainly affects the production that we see.

SPEAKER_01 15:32

So that kind of separates, that explains, you know, that state average yield, that number sounding lower than you would think it would be. Now the other side, Lenny, is looking at the variable cost of production. That number is going up. So we're looking at what last year, last few years, we called the most high-intense varieties at around $800 per acre at a variable cost management. In other words, just making it through the year. Our fertilizer, our pest management, irrigation, you know, our harvest. That number is now looking like $1,900 per acre per season. But Lenny, is there anything we can do about this? Is that number just a blanket number for every situation, every orchard, every variety?

SPEAKER_00 16:22

Yeah, well, so whenever we do the you know pecan beginners class that we just did a couple weeks ago, the first thing I start off with is the cost of production. Because I think a lot of people have this picture of what it's like to grow pecans and how great it is, and it can be great, but it's not easy. And I think a lot of people have the perception that, oh, you just go out there, you buy some buy a farm with some pecan trees, or you go out and plant some pecan trees, and you just come back in the fall and harvest them, and it's fine, it's easy. And there's a lot more to it than that. And so I I want people that are planning to do this to go into it really understanding what they're getting into. As I mentioned, there's a lot that goes into it. You got disease management, pecan scab. If you're growing pecans in South Georgia, and you'll probably hear this in every podcast that we do because it's such an issue, but pecan scab is the biggest disease that we face. It's a fungal disease, jumps on the leaves, jumps on the nuts, and can pretty much destroy the crop on some varieties if you're if you're not trying to manage it. There's a big cost to that. Insects. We got a lot of insect pests that we have to deal with at certain times of the year. There's a cost to that. We got weed control, irrigation. You know, as I've mentioned before, and I'll mention again, water is probably the key to growing pecans. And although we get plenty of rainfall here in the southeast, we don't always get it at the right time. And so you have to have irrigation so you can provide the tree with the water it needs to really consistently make a good crop of pecans. There's a cost to that, both in the installation of that irrigation and then also in the power to run it. So that's a big cost as well. And then you got a lot of other things that play into it. Now, when we're talking about the variable cost of production, as you mentioned, we are talking about all the things that you have to do every year to make the crop. So we're talking about your fertilizer, your you know, any pest control you may have to do, fungicides, uh, herbicides, insecticides, your labor costs, your fuel costs, repairs, uh maintenance, uh operation of that irrigation, maintenance of it, interest that you may have if you if you have uh borrowed money to grow the crop, and then the harvest costs, which can be pretty expensive. So all this together, you know, are things that you have to do every single year. And I was noticing in the budget that our economists put together back, you know, probably January, you know, the cost of production, the variable cost when they put that together in January was sixteen hundred and fifty-three dollars an acre, uh, which included all that stuff I just mentioned. Now, we've had some issues happen in the world that have affected some of those things on that list, uh, namely fuel and fertilizer. So our fuel and fertilizer prices have jumped from what they were when that original budget was was put together. So I went in the beginners, the beginner's class a few weeks ago. I went in and kind of updated that for my presentation that I gave, and I put the increased nitrogen cost on there, I put the increased fuel cost on there, and it jumped from sixteen hundred and something dollars an acre to eighteen hundred and twenty dollars an acre. So that you know makes it tough to look at. I I said I give that presentation usually to kind of scare people in the room when I give the presentation. So we kind of you know, I give them the opportunity, okay. So if if that scared you and you realize this isn't something you want to do now, now's your chance to leave. You know, but when I when I put this together, it scared me too, you know, jumping that much. And so at that price, you know, if you're looking at $1,820 an acre, variable cost in production, just doing all the things that are generally recommended that you might have to do to grow the pecan crop, you're looking at somewhere, say let's a thousand pounds an acre, you're looking at somewhere around a dollar eighty-five a pound before you even break even at that cost. Right. And that's that's tough. That's hard to deal with.

SPEAKER_01 20:32

All right, so that that explains, you know, how when we look at this from that state average perspective, we've explained a little bit about you know where that yield comes from. We can s Mike can separate getting higher yields versus the older trees. So that we need to discuss, Lenny. I want to talk too, obviously, about where we're at. We're on this variable cost budget. You know, and and you know, at the beginners class, you share this. You know, here's what you need to know up front. But for growers who are in it, anything that can be reduced.

SPEAKER_00 21:09

Yes, in in cases there are. But before I get to that, let me let me mention this. You know, we looked at that, we talked earlier about the for the average five-year price for the state. Between seven and eight hundred pounds, I think. Yep, that was average yield. Average yield, seven, eight hundred pounds. So if you're looking at that, at eighteen hundred and twenty dollars an acre, going all the way up to two dollars and fifty cents a pound price, you're not gonna break even at those yields. You won't you'll lose money at those yields growing pecans at that. So we have to have higher yields. There's no choice. Now, as you you asked the question you asked about are there things you can do to reduce that that cost of production? Yes. So let's go back to that that budget I mentioned earlier. So if you look at that variable cost of production, the fertilizer alone makes up almost thirteen percent of that budget. Your pesticide cost makes up about 18% of that budget. And a big chunk of that is the fungicides. That's actually the largest piece of that puzzle. So there's two areas there to look at. Now another one is your labor cost. Your labor is 26% of that entire budget. So there's some things to consider there. So I went in and kind of pulled out from the budget, you know, everything I thought could possibly be taken out if everything was right. So we'll talk about later in a later episode when we're discussing fertilizing pecans. There are some nutrients that when you apply them, they kind of stay there for a while because we're not tilling our soil in most pecan orchards. And so when you build those nutrients up, a lot of times some of them will stay at a higher level for a long time. They're pretty immobile in the soil. Others you have to apply more regularly, like nitrogen, for instance. Nitrogen you have to apply every year. Phosphorus, zinc, potassium to some extent, you may not have to apply every year. Lime, we have to lime our soil here in the southeast, in South Georgia, certainly, because naturally our the pH of our soils is low. If we don't lime, the pH is going to stay too low for those trees to pick up some of the nutrients they need. So we want to lime those soils until we get that pH somewhere around 6 to 6.5. But it's not something you have to do every single year. So there are bits and pieces of this you can pull out. So what I did was I said, okay, let's say I have an orchard that my phosphorus looks good, my potassium looks good, my zinc in the soil looks good. I don't have to line because the pH is where it needs to be. So I don't have to apply any of that. And I reduce my nitrogen rate from an average of 100 pounds an acre to 50 pounds an acre. What does that look like? Well, that gets that part of the budget down to 3% of the total budget. Let's say I'm growing a variety or cultivar that has really good scab resistance, something like Lakota or Avalon that I don't have to spray, but maybe three times. That gets that pesticide budget down from 18% to 12%. So just with those two things alone, the you know, addressing those, the lowest I could get the budget down to was about almost $1,400 an acre, so $1,386 an acre. So that's still pretty high cost. But you know, you're you're taking some of that, you're you're bringing that cost down. And at that price, you know, you're looking at a thousand pounds an acre, you may be looking at somewhere around a dollar forty a pound to break even. So that looks a little better. But there's still only certain situations you can do that.

SPEAKER_01 25:05

There's a grower in East Georgia, and they came out, did all the soil samples, did grid samples, excellent job. Leave tissue samples back in the summer. And like you talked about, that maintenance fertilizer said, you know, they give me back the fertilizer and recommendations, it comes out to a little over $40,000. Uh, he said, I went back and took the simplifying our fertilizer decisions, Lenny, which was created by you and is available on the University of Georgia blog. And he sat down and went through every soil sample and every leaf tissue sample and determined what the tree actually needs. He said, after going through that, my total fertilizer, if I follow this calculation, would come out to around $7,000. And that's a huge difference. Just using your simplifying fertilizer decision calculator, it shows again, this is from you, but it's how much our trees store nutrients.

SPEAKER_00 26:08

Yeah, it makes a huge difference. And and this isn't something I just came up with off the top of my head. This is based on going back and looking at the all the research done on, say, potassium fertilization and phosphorus fertilization and zinc and and lime and all that, um, and how the tree uses nitrogen too. You know, so it's all scientifically based, and and you know, the pecans aren't like a it's not like planting an annual row crop where you have to provide everything that that crop might need the you you plant it because you're gonna harvest it the same year you plant. For pecans, uh being a long-lived tree, a lot of times whatever you do to that tree that one year is gonna affect it for several years down the road. And they'll they'll store a lot of this energy in the tree to be used later. If you give them an excess of nutrients, what they don't use, a lot of times they're gonna store and use it as they need it. And so if you're making these applications, you need to have an understanding of how the tree uses those particular nutrients and how they react in the soil to really know if you need them or not. Another thing, and this is where I think smaller growers sort of have an advantage in in this case, is the labor costs. So if you've got thousands of acres, you can't do that by yourself. You've got to have people that you hire to help manage all that. So a big operation like that's gonna have a higher labor cost. But if you have a smaller acreage, let's say a small acreage is something probably less than 200 acres. But if it's something you're gonna work totally by yourself, it probably doesn't need to be much bigger than 100 acres. If it's if something you work by yours, you know, yourself with maybe one other person, then you make it go to 200 acres. So but the more of that labor you can do yourself, the more you can cut that budget. And so this is where an area that small growers have a little bit of an advantage there. Big grower can't do that. Um, you're still always going to have your harvest costs. The other area you can look at is if you are a smaller grower, you may not have to borrow money to grow it. So you don't have that interest that is a big part of the budget, too. You wouldn't have that involved in it. Large growers, you know, making their living, growing the crop with thousands of acres, it's pretty hard to do on that scale without borrowing the money to grow the crop every year. So you gotta include that interest in it when you're including that. So yeah, it's it's expensive to grow pecans. There are things you can do to bring that cost down, but you can only bring it down so much.

SPEAKER_01 28:52

Lindy, that's a very clear about a few things in that variable cost budget we can attack. You know, you got the fertilizer, you got the fungicide, you got a little bit on your harvest, you know, some different things there. But that what I'd love to do is kind of shift that back to the other end, which was that state average yield. And this kind of goes with in my mind's on that fungicide a lot, because in East Georgia, we've planted a lot of low, we call them low input varieties. But generally when we say that, we're referring to less scab susceptible. And that is where we can reduce a lot of these fungicide. And of course, that has to do with the variety. So if we can get through a year with three fungicide sprays on Avalon, Lakodec, Cell, McMillan, Elliot, what about the yield on some of these varieties? Would that shift our economics as well?

SPEAKER_00 29:47

Yeah, I really think that's the key is the variety that you're growing. If you look at, you know, what growers need to be planting in the state right now, it's it's varieties that have that high yield potential that you mentioned. You know, we want varieties that produce 1,500 to 2,000 pounds an acre as opposed to 800 to 1,200 pounds an acre. Um, and we want varieties that have really good disease resistance. And we have a lot of varieties that fit both those categories. So Creek, Avalon, Lakota, Sumner, XL, and then you can throw a few others that that may not have quite that level of disease resistance, but it's a little, you know, it's still within reason, and they have the yield potential to reach what we need. So there you're talking about Caddo, Cape Fear, Oconey, and you mentioned a few others, you know. So we have varieties that that will fit what we need. The problem is you can't go out there and plant it one year and harvest it that year. With pecans, it takes you know eight years really before you're getting a decent yield off of most varieties. Now, when we when that China boom was happening and we were really planting hard and heavy, we were planting honestly some of the wrong things. So we were planting at that time, you know, the demand was for things, big, big pecans, like desirable. Desirable is our scabbiest variety that we grow. It also has a really low yield potential. But it at that time it was bringing a high price, so you could do it. It worked. Now there's a couple of things that happened with that. We were also planting a lot of pawnee at that time because pawnee is the earliest harvested variety and it brought the highest price. There was so much of that planted during that time, it has sort of taken the place of desirable in the market. And so the price for desirable is not really a premium price anymore. It's dropped off to more like what a steward is. And, you know, that changes the whole game with desirable because if you're not getting that premium price, it's hard to justify all the inputs it takes to grow desirable. Pawnee also takes a lot of inputs, but it's so early it still brings a higher price, but there's a couple of things that you got to think about there. You know, we've planted so much of that over the last 10, 15 years that there's two things you gotta worry about. One is are we do we have too many Pawnee out there? Is that going to at some point start to affect the price? The other thing is related to scab. Yeah, so the more you have of any single variety planted out there, the greater chance that scab fungus can overcome whatever resistance that particular variety may happen to have. And it also gives it more exposure to the fungicides because you're especially if it's one that is sort of scabby already and you're having to spray, it gives that fungus a greater chance of becoming resistant to the fungicides as well. So on that particular variety. So uh there's a lot that plays into that. And probably over the last six or eight years, our planting has shifted. We went from planting a lot of Pawnee and desirable to planting more Creek, more Avalon, you know, Lakota, Keddo, a lot of those varieties, which I think long term are going to be much better varieties.

SPEAKER_01 33:20

Well, and also with the with those varieties, you know, let's think about like a shelled market. If we are back more into a shelled market, that's a larger nut and a thinner shell. So that makes that more favorable. And you you mentioned going back to the desirable, you know, to your credit, I was a new county agent when that China market started, which is how me and so many agents at the time got to know you when people I've started extension and people walked in the office who had never done agriculture and wanted to know how to plant pecan. But I remember one time, I think it was 2013, you told me on the phone, you said, uh, you know, the prices are really good right now, but the scab on desirable is such that we honestly don't need to be planting it. And Lenny, I was new and young, and I didn't understand what you I understood what you were saying from the economic perspective, but I didn't understand that that's how many people were still trying to plant it. You mentioned this in our historical part, but that was a time when we were excited. So we wanted that higher price. We we we needed it, but likely that wouldn't ever it wouldn't sustain forever. And that is something that you know a grower can do to make a big difference. So with a desirable today, you know, your the amount of fungicide you have to put on those desirables to make it becomes a very strong issue with the break-even price.

SPEAKER_00 34:53

Yeah, I mean, really after it became obvious where the market was headed in 2018 with the tariffs and what it looked like was going to happen with China, I kind of I started recommending trying to get away from desirable planting, you know, more resistant varieties, that type of thing. And I had some growers that just told me flat out that I'm not cutting down my desirables. And now I heard that too. A lot of them have done that.

SPEAKER_01 35:18

Well, when I was county agent in southwest Georgia, you know, they would tell me the same thing. They loved them. And they said, they said, we we don't it doesn't bother us having to spray it greater than 10 times if we had to. I mean, we had some rainy seasons back then, 13 was one of them. And they said if we could keep that nut clean, they're going to be marketable, you know, but uh, but sadly that's the changes in the market.

SPEAKER_00 35:40

I think also, you know, what happened is that the the reality of what was happening to the market had not really hit them yet. And so they were reluctant to do that, and it's understandable because it's a huge expense to you know shift over from one variety to another. And as we mentioned, it's it's not only is it a huge expense, but when you do that, your your production drops for a period of time, you know. So it's completely understandable they're reluctant to do that. And so they are they're most of them are now shifting over to those varieties. Sometimes uh you know they're interplanting in the existing orchards and kind of getting what they can off those older varieties until the younger ones come into production and taking the older ones out. Sometimes they're just taking out blocks of uh those older trees and planting new ones. So there's different ways to approach that, but but you know, there's a lot of things we can't control about the market. But the the you know, we need we can control what we grow. And we have to have basically there's there's three things we have to have, and that these new varieties offer, and that's cheaper production, a better percent kernel, or better quality, so that your your average price is generally going to be on the higher end of whatever the market happens to be at that time. And then higher, and so mainly if you've got that cheaper production and higher yield, that offsets a lot of the problems that we see. But the problem that we have in growing a long-lived perennial crop is that that takes time, and so growers have to be able to weather, you know, some rough spots until they get those young trees into production. And young trees are generally going to be a lot more consistently productive. Uh, the quality is gonna be better more consistently than these older trees will as well. So that that helps. And I can give you an example too. I know I have this one slide that I'd usually do for uh the beginner's class that I'm kind of comparing basically desirable and Lakota, you know, growing those two varieties right now. And based on the production that we've had off Lakota, I truly believe we can we can consistently maintain 2,000 to possibly up to 2,500 pounds an acre with Lakota. Uh you have to manage the crop load because Lakota has it produces so heavily that it it'll, I mean, it's the heaviest producing variety I've ever seen. And it'll produce so heavily that, you know, the year it makes a big crop, the the tree can't really fill out all those kernels that it makes. So it uh it doesn't look great that year, and then the next year uh it doesn't have a crop because it overproduced too many the year before. But if you manage the crop loan on Lakota, you can keep that production consistent and consistently heavier than you would have on something like desirable. So desirable at best, you're gonna get 1,500 pounds an acre. So I kind of gave the the average scenario for Lakota and the best case scenario for desirable on yield and and price. And I actually went for Lakota, I actually showed a the lowest price we've ever had, which one year we had, you know, everything was was low. And so the price we got for Lakota that year was $1.35. But it produced 94 pounds of trees, so around 2,500 pounds an acre. So you can you can bear a low price when you're making that kind of yield. But so for desirable, and then the example that I'm using, I had this I had Lakota at about 2,500 pounds an acre, average price of $1.35. You know, we got much less cost of production on Lakota for desirable. I had 1,500 pounds an acre, which is like the probably the best yield you'll get on desirable, and I gave it $2 a pound, which are prices you really don't see for desirable anymore. But I gave it best case scenario. And then I looked at that cost of production for Lakota and Desirable. And when you do the net income from Lakota, it was $2,300 an acre for desirable, it was $1,192 an acre. As a net return. As a net return under best case scenario, and that's with 10 sprays on desirable. In some places you grow desirable, you may have to, in some users, you may have 12 sprays on there. With Lakota, I had three sprays. So it shows it makes a huge difference.

SPEAKER_01 40:10

So we're talking varieties that have less sprays to manage them, as well as a variety that gives us more yield. That is what that is what brings up our net return.

SPEAKER_00 40:27

Absolutely. And just to kind of summarize, you know, what growers can do to get that cost down, there are some options. One is the variety choices. Being smart with your your water, applying the right amount of water at the right time, not overwatering at other times, being smart about your fertilizer choices, look at your leaf and soil samples and understand what those numbers on those leaf and soil samples mean. Don't just arbitrarily go with whatever the recommendation at the bottom of the page is on those samples. You know, usually they'll just give you a general maintenance recommendation. And if you don't understand what the numbers mean in the leaf and soil sample, a lot of times you'll just go with that. But if you understand those numbers, you may realize that you don't need to apply certain nutrients at certain times. Be smart about what you spray. Understand that some varieties need less fungicide than others. Know when you need to spray those insects and when you don't. Be careful about the things you put in that spray tank because there are people out there that will sell you anything and everything under the sun to include in that spray tank, and they'll tell you it cures everything. I go back to the old Andy Griffith episodes of the miracle salve, you know, cures everything, cures the mange. So that's right. You know, it's an example of a snake oil, another Andy Griffith episode, you know, Colonel Harvey's Indian elixir, you know, would cure cure what ails you. So there's a lot of snake oils out there like that, and they're pushed on growers a lot, and they'll say, Oh, it doesn't cost much, just try a little. Well, with the cost of production we have now, any little increase makes a big difference. So if you can't verify that what is being sold to you has been tested independently, you know, not the company testing it, not the guy selling it testing it, not giving you pictures of this is treated, this is not treated, but that shows you data of this product being used on pecans in Georgia, and it makes a significant difference. Just don't include it in the tank. The other thing is your microclimate in the orchard. So that makes a huge difference on your scab pressure. So we know that you know we kind of use highway 280 in the state as kind of a dividing line between being able to grow some varieties with fewer sprays than others. Uh because generally your elevation along highway 280, there's kind of an increase. It goes from being maybe 200 feet to 350 feet in elevation. And that little elevation change makes a big difference in the airflow that you get, and that makes a big difference with your scab control and the scab pressure that you have. Sunlight in the orchard, you know, we see a lot of times that orchards that are crowded, or orchards that have, you know, the woods or the woodline going right up to the orchard and you know, may be surrounding that orchard. Um, we see those situations have a lot heavier scab pressure. And when growers go in and push those woods back a little bit, or remove trees, get more sunlight and more airflow in the orchard, that makes a dramatic difference in the ability to control scab and manage it. So those are things you can do also to help get the pressure that you have. On you to control that disease down a little bit and hopefully maybe reduce your cost of production sum in the long run. The other thing, and we'll we'll probably touch on this as we get into later episodes, especially the one on orchard establishment that we'll do later, is tree spacing. You know, when the planting boom took off with China, we saw our tree spacing really increase or the tree spacing decreased, the planting density increased in the orchard. Um we wanted more trees per acre. Yeah, we started having a lot more trees per acre. Uh growers instead of planting on a more traditional spacing of like a 40 by 40 or you know 30 by 50, 30 by 60, we started seeing a lot of stuff 30 by 30, 25 by 25, 20 by 40, really pushing it on the density. And when you increase that tree density in the orchard, you're increasing the cost of everything. You're increasing the cost of establishment, of course, because you got a lot more trees. But because your rows are closer together, if you're spraying your herbicide strips, you got more, uh, you're having to cover more of the acreage with herbicide. You're having to spray fungicide more because your tighter spacings generally are going to cause uh reduce your airflow and increase your scab and insect pressure. So your cost of management all goes up dramatically. And what we've seen with these really tight spacings is that they generally just don't work in our area. And we'll talk more about that later, but I much prefer spacings that are more traditional, like the 40 by 40, the 30 by 50, 35 by 50, things like that. I think we don't need more than about 35 trees per acre in our orchards in Georgia. So those are some things to think about, you know, in in looking at your long-term, looking at your cost.

SPEAKER_01 45:48

Yes. You know, we've covered Linda, this podcast has covered that beginner's class that you did at the Georgia Growers Association in economics, and it really answers the question of how to reduce that variable cost budget, how to to increase, get that yield up over that state number that really makes it look very difficult. And I'm in East Georgia, I work with a lot of different growers and those county agents over there, and what I've learned we have a number of first generation farmers. One of their things, and again, they're usually smaller, so they're all under that 200 acre that you mentioned. How do they afford that equipment?

SPEAKER_00 46:38

Yeah, so equipment costs are that's a whole other piece of the puzzle aside from the variable cost of production. That variable cost of production is assuming you have all the equipment you need and it's paid for. If you start adding equipment cost to that, which is the reality, that adds a whole other level of it. So you have to kind of grow into the equipment that you are gonna need. So if you just plant an orchard from scratch, you know, starting out, all you're really gonna need is uh a tractor and a mower and uh maybe a herbicide sprayer. As you get into it later and those trees come into production, you need a whole other set of equipment. Then there's there's options for that. In some areas, you know, you may have people nearby that can contract harvest for you for a while, and then you can kind of start to increase some, get a little income going from it, and that's that you can then invest in your own equipment. And a lot of times a new grower probably needs to start out buying used equipment. Heck, at these prices, even uh experienced growers probably need to buy used equipment too. Yeah, yeah. These these uh equipment prices have jumped kind of like the fuel and and nitrogen, but but way before. So, yeah, you kind of have to grow into the equipment that you need. And you know, let's say like harvesting, for example, you know, most uh operations use a harvesting system where we, you know, you'll have a sweeper and a blower on the tractor that kind of goes through the orchard after you shake it, and kind of you're sweeping, you got to get those nuts out of the tree row. So you're sweeping the nuts to one side as you go down along the edge of that tree row, and there's a blower on the back of the tractor that blows the nuts across the row to the other side. And so they s they kind of sweep and blow these nuts into wind rows, and then the harvester comes along and just kind of picks up those those wind rows. You could also, uh a smaller grower, especially, may want to think about something like a smaller harvester, like a savage harvester, where you really don't need all that other equipment. You can just circle around and around each individual tree with that. And if you've got a smaller acreage, that's doable. And they're a lot less money than uh than this other whole system that I just described. But you'll still have to get somebody to shake the trees for you in in those cases because those uh shakers are super expensive. It's a big piece of equipment with a lot of hydraulic hoses and hydraulic motors and all that on it, and that drives the cost up. So again, in a lot of areas in South Georgia, we're fortunate because there's enough people doing this that you can contract it done.

SPEAKER_01 49:23

But uh Is there an acre size where economically it makes more sense to harvest on your own or hire it out that you have thought of?

SPEAKER_00 49:34

I would say that if you're certainly less than a hundred acres, it's probably better to to hire it out, contract it out. If you're more than that, you can you can probably afford to start investing in equipment. 100 acres you could even, you know, maybe do with a savage harvester or something like that. But you know, you just still you you'd have to kind of grow into that gradually.

SPEAKER_01 49:57

That that really answers that. You know, in other words, for our you know, first generation farmers, their equipment costs, a lot of that is you're building it over time. So you're not having to start out with everything at once. So that's part of it. The other part of it is once you get to harvest, you might look at your acreage, you less than 100. Hiring some of that out is going to be more economical than you doing it yourself in those situations. So as you get more acreage, doing it yourself becomes better.

SPEAKER_00 50:27

Absolutely. Yeah. I mean, it's not something unless you just have have extra money set aside and or independently wealthy or something. It's not something you can just jump into and buy everything you need all at once.

SPEAKER_01 50:38

Well, I'll say this at the Vidalia Onion and Vegetable Research Center, we have five acres of low-input varieties that I'm managing. And um, though we hadn't gotten a harvest yet, we'll touch on that this year actually, probably for the first time. It won't be every tree. But um, yeah, I've seen how you know we were able to do a lot with less. But then again, there's no orchards that are five acres. You're usually looking at probably the minimum is even on my size, 30, but probably 50, you know, 50 and up from there. And then people are a lot of growers that I see they're doing um, they got their orchard, but they also do have another job. So they're coming in and doing both, you know. So they are thinking more along these lines of do I hire this part out? Do I do this myself? And obviously doing everything doing a lot yourself saves on that labor. But there's a lot of time involved in managing our orchards. So that has to be considered in the economics of things.

SPEAKER_00 51:36

Yeah, I would I would certainly say for small growers, do as much of it as you possibly can. And most small growers, of course, and actually the statistics show that most most farms out there have some off-farm income. But certainly your smaller growers are going to usually have a a full-time job and they're growing pecans on the side. And so they have to think about not just the expense of things, but their time. Because, you know, probably the two most time-consuming things in the orchard is spraying those nuts for fungicide and and all that, and also the harvest cost. I mean, you're gonna have more, it's gonna be more time consuming, those two tasks, and you're gonna have more breakdowns. Uh, so those are the two things that you know you may want to see about possibly contracting out if you don't have the time. And then maybe do the mowing and herbiciding and all that kind of stuff yourself, you know, just to try to cut some of those costs. Well, I've enjoyed this episode of the economics of pecan production.

SPEAKER_01 52:38

Uh, Lenny from the beginner's class, we have a lot of slides that would show this information where they can actually see those numbers. Where can people find those?

SPEAKER_00 52:48

Yes, those should be available at the Georgia Pecan Gorge Association website. And I will try to get a uh a blog post up that'll have a link to that. And also let me say, Andrew, you know, I think as we mentioned, the key to reducing our cost of production and making these economics work, both from a cost of production standpoint and from a yield standpoint, the key is the varieties that you grow. And so I think this kind of sets us up good for where we would be going next for the next episode. You know, our plan is to do pecan varieties or cultivars. That'll maybe that sets us up for that.

SPEAKER_01 53:26

Pecan varieties is what's coming up next. So that'll lead into it. Dr. Wells, once again, it's been great.

SPEAKER_00 53:32

Yeah. Enjoyed it, Andrew, and always do it again.

SPEAKER_01 53:35

Thank you all for listening. Stay tuned for the next episode. You can get more information on the University of Georgia Pecan blog in a nutshell, the PCAN podcast.