U.S. Government Driving Pecan Growers and Pecan Buyers Nuts

Pecan harvestingThose who contend that the Federal government has no business managing the nation’s healthcare system because it can’t even manage its way out of a paper bag got fresh ammunition this past week.

The Wall Street Journal published an article chronicling how incorrect government data has wreaked havoc in the pecan industry. Evidently, the government vastly overstated the amount of pecan exports to Asian countries and other destinations in 2010 and 2011.

The relatively small size of the U.S. pecan industry (just shy of $700 million production) means that there isn’t a futures market for the crop. Instead, pecan buyers look at trade statistics to determine whether demand will be strong or weak – and lock in purchase contracts accordingly.

When U.S. trade stats purported to show heavy overseas shipments – and with the Chinese market ramping up purchases for the Lunar New Year celebrations – pecan buyers locked in their purchases early. And pecan growers in the Eastern U.S., where the crop is harvested first, did well with supplying the product at these lucrative prices.

But when the “phantom demand” from overseas failed to materialize, pecan prices tumbled. Growers in the Midwest and West found themselves facing pecan prices nearly half the levels of just a few weeks earlier.

The culprit? The Federal government, which published the completely bogus trade figures based on “a computer malfunction” at the Census Bureau’s foreign trade division.

“There were internal processing errors,” division chief Nick Orsini reported.

When and how did the government find this out? Not until one of the industry’s buying firms questioned the figures and reported its concerns to the agency.

The foreign trade division’s “internal processing errors” have since been fixed. But in its wake is a trail of debris that reaches into every corner of the pecan industry.

Some buyers are miffed because they were led to lock in purchases when the market was at its peak, wasting hundreds of thousand of dollars on high-priced buying.

Midwestern and Western growers who harvest later in the season found themselves having to sell their crop at a deep loss, the market having crashed. So they’re not happy campers, either.

One thing’s for certain: Everyone in the pecan industry now knows what it’s like to be burned. And because it’s the government … there’s nothing anyone can do about it.

Oh sure, the National Pecan Shellers Association sent an official letter to Federal officials outlining its concens with the faulty data … but that promises to have as much impact as a pecan tree falling in the forest.

And from the Federal officials’ point of view, what’s the big whoop, anyway? What sort of political clout to these people have?

After all, it’s just a ~$680 million industry.

About on par with Solyndra.

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