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THE pecanSHELLINGANDPROCESSINGNDUSTRY

Problems

Practices

Prospects

UjS ~Pr F A G R I C U tT P FR lMTimi G R I C i T i ; p

SEP26 9 6C U R f f a v r S E R I A L _jD5

AgriculturalconomicReport5U.S.DEPARTMENTOFGRICULTUREECONOMICESEARCHERVICEMarketingconomicsDivision

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PREFACEPecanshelling and processingonalarge-scalecommercial basisi srelativelynew.Littleinformation has been publishedconcerningtheindustry--itssize^locationândmarketing practicesand problems.hose w ho produceand market pecanslong havebeeninterestedinthecompositionofthepecan-marketingcomplexandin howitsefficiencymight beimproved.hisstudyi s partof a broad programof researchaimed atimprov-ingmarketefficiency and expanding marketsforfarm productsîncluding pecans.Dr.N .M .Penny^Head^Departmentof Agricultural Economics^Georgia AgriculturalExperimentStationÊxperiment^Ga.^cooperatedi n planning theresearch^designingthequestionnairesând giving adviceandcounsel throughoutthestudy. Mr.Olin W .Thompson^GoldKistPecan Growers^wasinstrumentalininitiating theproject. Mr.J .GivensYoung,President,andMr.Henry A .Bucklin,Secretary,National PecanShellersand Processors Association,provided listsof pecanshellersand helpedobtain theco-operationoftheindustry. Mr.Hugh King,FunstenNutCompany,supplied thepicturesof pecan halvesand pieces. Pecanshellersandprocessorsthroughoutthecountrygaveunstintinglyof theirtimeandinformationconcerningtheirbusiness practices.TheDepartmentsof Agricultural EconomicsinSouthCarolina,Georgia,Florida,Mississippi,Arkansas,and New Mexicocooperatedin thestudyb yconductingsurveysofpecangrowersinthoseStates. Theresultsofthesestudieswill becombined and pub-lishedinalater report.

C O N ' I E N T SPage

SummaryiIntroduction 1Method ofStudy2The PecanShellingOperation 2TypicalOperations 2Variations 6Industry Location6Numberand SizeofFirms6CharacteristicsofPecan Shellingand Processing Firms 8BusinessOrganizations 8Ageof Firms9Facilitiesand TheirUse... 9Numberof Employees0LaborRequirements1Practices2FinancingInventories 2Storage2Washington,D .C . PageProcurement3CropEstimates5Varieties5Sources6Regions7Useof Grades8Shelled Pecans9Sales 9OutletsforShelled Pecans. 1OutletsforIn-Shell Pecans 1SalesPractices2Sales byAreas3MarginskConclusions6LiteratureCited 7SeptemberI962ForsalebyheSuperintendentofDocuments U.S.GovernmentPrintingOffice Washington25 D.C. Price20cents

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SUM4ARYPe c a nshellinga n d proc e ssin gfirmsarelocatedthroughoutthesouthernpecanpro-ducingStatesandinSt.Louis^Chicagoând Pittsburgh. The8 0to9 0firmsintheindustryassemblelargequantitiesofpecansfrom w i d eareasofproduction^shellandprocessthemând marketthemthroughcomjnercialandretailoutlets.The7^firmsinthesurveyha dnetsales(totalsaleslesssalestoothershellersand processors)ofiGhm illionpoundsofpecansinI96O-6I. T he8largestfirms(netsalesofover5m illionpoundseach)accountedforko percentoftheindustrysales.

T he3 7largestfirms(netsalesover1m illionpounds)accountedfor9 0percentoftheindustrysales.Forty-fourpercentofthepecans h el l i ngand processingfirmsw e recorporations. Ofthe8firmssellingover5m illionpoundsofp ecansayear^5v / e r ecorporations^1w a sacooperativeând2w ereproprietorships. OftheI8firmssellinglessthan50 0-0 0 0poundsofpecans^1 3w er eproprietorships^2w er epartnerships^2corporationsâ nd1 w asacooperative. D u rin gtheI 9 6 O - 6 1season,thepe c a nindustryoperatedatabout35percentofitsestimatedcapacity.irmswithnetsalesofover5m illionpoundsoperatedonafull-timebasisandattainedanoutputrateof6 0percentoftheestimatedcapacity. Firmssellinglessthan5 0 0 , 0 0 0poundsofpecanste n d e dtobepart-timebusinessesandoper-atedatanaver ag erateof1 0percentofcapacity.Purchasesofin-shellandshelledpecansb ypecanshellersand processorstotalednearly1 75million pounds. T he8largestfirmspu rc ha se d^5percentofthetotal.Thenext9largefirmspu rc ha se d2 3percent. T heI8smallestfirmspurcnasedonly2 . 5percent.Salesofi n-s h el lpecanstocommercialoutletsaccountedfor6percentoftotalsalesofshellersandprocessors. Groceryw hole sa le rsandretailersw er ethemajoroutletsforin-shellpecans. Bakeriesandbakerysupplierspûrchased3 6percentof

allpecans,or3 3percentofthoseshelled. ConfectionersusedI9percent,andthecombined pu rc ha se s bygroceryw hole sa le rsandr etai l er stotaled2 0percentofallpecansmarketedcomjnercially. Theuseofpecansbyicecreammanufacturersw as6per-centofthetotal,do w nfromanestimatedaverageof1 2percentin1 950-52. Theremainderw a susedb ysalters,repackers,and mail-ordergiftpackers.Thecomputationof m a rk e t in gmar g i nsforshelledpecansemp h as i z e sthatthesuccessofthei ndi vi dualp ecanshellermaydependl ar g el yonthesoundnessof hisbu y in gpractices. Forexample,a1-centincreaseinthecostofhisin-shellpecansincreasesthepecankernelcosttotheshellerb y3cents. Qualityevaluationofthein-shellpecansisextremelyimportant:he kernelcosttotheshelleris8 7 . 5centsperpoundforpecansw h i c hcost3 0centsperpo'undin-shellandy ie ld35percentkernels.he

kernelcosttotheshellerw o u l d beonly75centsperpoundifthenutsy ie ldkO per-centkernels.T hepecanindustryneedsresearchas s i s tanceinseveralimportantareas. Onpro-ductionproblems,additionalresearchisneededtofindnewvarietiesandneworimprovedculturalpracticestostabilize,ifpossible,thew i d evar i ati o nsinpecanproductionfromyeartoyear. On marketingproblems,neededresearchincludesstudies(1 )toascertaintrendsoffuturepe c a nproduction,(2 )toincreasetheaccuracyofcropforecastsandestimates,(3 )toimprovetheadequacyandaccuracyofreportedpricesforpecansatthevariouslevelsinthemarketingchannels, h) todeter mi nethecompetitiveposit ionofpecansincomjnercialuses,and(5)tofindne wand e.xpandedusesforpecans.

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T H EPECMS H E L L I N G AKDPROCESSI N GIN D U S T R Y --P R A C T IC E S ,PROBLE M S,PROSPECTSB y

JiilesV.Po we lla nd Bon nA.Re im u n dagricultiiraleconomists M a rk e t in gEconomicsD i v i s i o nEconomicResearchS er vi ceIN TRO D UC TI ON

Thepecanshe llin gindustry hasg r o w nfromsmall,la rge lyhand-operated,side-lineenterprisestolarge,h i g h l ya u tom a t e d businesses. Itisasmallindustry,butforthousandsof pecang r o w er sthroughouttheSouth,itsw e lf a reisv it a llyimportant. Pecansareproducedcommerciallyin1 1ormoreStates,fromNorthCarolinatoNe wMexico,and uptheM i s s i s s i p p iR i verintosouthernIllinoisandIndiana. T he yare

producedonthousandsoffarmsandonci tylots. Somearecarefullycultivated;mostarenot. IntheSoutheast,mostofthepecansareImprovedornamedvar i eti esandareplantedingrovesororchards. IntheSouthwest,pecansarepre dom in a n t ly w i l dorseedlingtreesthatvolunteernearsourcesofwater. ThroughouttheSouth,pecantreesareplanted a rou n d homesinurbanandruralareas,prov id in g bot hshadean dsomecashincomefortheowner.

Thevastprodu c t ionareaa ndtheva rie tyofsituationsunderw h i c hpecansarepro-ducedmakeaccurateforecastingofthesi z eofthecropre a c hin gcommercialchannelsinanyyearextremelydifficult. Fore c a st in gisfurthercomplicatedbythetendencyofpecantreestoproduceacropofnutseverysecondyear. T henetresultisthattotalpe c a nprodu c t ionvarieswidelyfromyeartoyeareventhoughlargecropsinonepartoftheprodu c t ionbeltfrequentlyarepa rt ia llyoffsetbysmallcropselsew here.Thelongtimetrendofproduction,however,isupward.M ov e m e n tofth i sunknown,h i g h l y-var i ab l e ,and heterogenouscropofnutstomarketintheform mostconsumersw a ntit--shelled--isa c c om plishe d b y8 0to90 shellersscatteredthroughoutthepe c a nbelt,andinSt.Louis,Chicago,a n dPittsburgh. Someofthesefirmsw er einbu sin e sswhenpecanshelling w a s la rge lyahandoperation.Theproble m softhepe c a nshellingindustryarisefrom bot hthesupplyandthe

demandside. S h el l er sarefaced w i t hva ria bleannualsuppliesfromwidelyscatteredareasofproduction. Qualityoftheraw productvariesgreatly. She lle rsmay purchasesuppliesfortheentireyearonlyduringare la t iv e lyshortharvestperiod. Finally,bu y in gcompetitionintheprocurementofpecanssometimesresultsinunrealisticpricesfortheavailableb uti ndeter mi natesupplyofnutstobemarketed.Onthedemandside,thepe c a nshellerfacesadisadvantageous a sy m m e tric a ldemandforpecans. B^jyersarepu rc ha sin galuxuryingredientthathasseveraldosesubsti-tutes. Consequently,ifshelled pecanpricesareh i g hrelativetopricesfor competingnuts,pecanpu rc ha se s arecurtailed,asthemanufactureofpe c a nproductsmay bedis-continued,ortheamountofpecans includedintheproductsm a ybereduced. This salesresponseisprevalentatboththecommerciala n d hou se holdlevels. Butconversely,

re la t iv e lylow pricesfors h el l edpecans donotresultimmediatelyinproport ion a t e lyg r eaterincreasesintheamountpurchased.

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Pecanshellers ôperatingundercompetitiveconditionsandw i thincompleteorin-adequatekno w l edg econcerningsuppliesandprices_,oftenr eal i z ef i nanci algainsandmanyhaveprospe re dovertheyear s . l/ften^however^shellersarecaughtinthecost-pricesqueezeofhigh-costîn-shellnutinventoriesandlowpricesforpecankernelsintheterminalmarkets. Thisstudyw asdesignedtodescribeandevaluatethepecanm a rk e t in gsystemîn-cluding marketorganization^tradechannels^buyingandsellingpracticesând methodsofe st a blishin gprices. Theoverallstudyinvolvesresearchonfourmajorcomponents

ofthep ecanproduction-marketing complex--nurseries^growers^shellersand processors^ andGomnercialusers. Thisreportdealsw i t htheshellingandprocessingcomponentofthep ecanm a rk e t in gsystem.M E T H O D OFS T U D Y

D u r i ngthespringof1 9 6l âlmostallknov^ncommercialpecanshellersandproces-sorsthroughouttheUn it e dStatesw er einterviewed. Concurrentw i t hthissurveyêxperimentstationsintw oStatescooperatedinconductingsurveysofpecangrowers^ andstationsinfouradditionalStatesco nductedsurveysduringthesummerandearlyfallof1 9 6 1 . Approxim a t e ly6OOpecangrowersinthesixStatesw er ei nter vi e w edtogetade sc ript ionoftheirproductionand m a rk e t in gpractices. Theresultsofthegrowersurveysw i l lbecoveredinalaterreport.

T H EPECMS H E L L I N GOPERATI ON

T yp i calOperationsPecans h el l i ngfirmspurchasein-shellpecansandmarket pecanker nel sbysizes^grades^,andqualitiesinvariousbulkandretailpackages. Proc e ssin gfirmspurchasein-shellpecansandc l e a n _ ,bleach^polishândsometimesdyethenutsforsalein-

shell. M ostpecanshellingfirmsalsoprocesssomenutsonrequestândsomeoftheproc e ssin gfirmsalsoshellsomenutsthatarenotsuitableforsalein-shell. Lessthan1 0percentissoldin-shellyandmostpe c a nproc e ssin gisdonebythreeorfours p eci al i z edfirms. She llin gandproc e ssin gfirmsarecombinedinthisstudytoavoidd isc losin ginformationabouti ndi vi dualfirmsthats p eci al i z einprocessing.Processingisasimpleoperationre qu irin gam in im u moflaborandequipment. She llin gisamoreinvolvedoperationre qu irin gexpensiveequipmentandmuchhandlabor. A brie fdescriptionofthefunctionsperformedinamodernshellingplantfollow s.Pecansarereceivedats h el l i ngplants invariouscontainers. Buyersanddealersusuallydel i vernutsin1 0 0 - pou n dcottonorburlapbags. S mal lgrowersandlocalpickersbrin gnutstotheshellingplantinsundrycontainers. However_,thesenutsrepresentasmallpartofthetotalsupplyavai l ab l etothesheller.

1 /TheM ar ketNe w sServicereportspecanpricesduringtheharvestingand marketingperiodco mmenci ngthefirstofNovemberandrunningthroughDecember. Thisservicehasbe e navai l ab l eforseveralyears^butshellersreportedtheydidnotuseitine st a blishin g prices.

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Theshellerw eighs,inspects,andpurchasesthenuts . 2 /romthispointon,theas s umesusualmarketriskshecauseofunpredictablevariationsinquality,inw e i g h tduetodrying,and prices.Pecansarestoredinthebagsinw h i c htheyarere c e iv e datthes h el l i ng plant,

r,insomemoremodernfacilities,theyarecleaned,sized,andemptiedintolargebinsforstorageu n t ilneededforshelling.

Cleaningconsistsofrotatingthenutsinlargecyl i ndr i caldrumsi thslotslargefordirtandleavestofallthrough,buttoosmallforpecans.romtherotat-ngcyl i ndr i caldrumsthenutsareconveyedtob l o w i n gmach i nesw he retreamsofairhighpressureremoveadditionalmore-adherentdirtanddebris.

Fromtheb l o w erorairspray machinethepecanspassthroughagradingorsizing Thisisacyl i ndr i caldrumw it h1 0slotss i z edfroms even-s i x teenth sofantooneinch--giving 1 0di ffer ents i z ecategories. Thepecansarecl as s i f i edintobythesediameters. S i z i n gofthenutsisimportantbecausethecrackingmustbesetforspecificsi z es. Ifnutsofvaryings i z e sarerunthroughtheefficiencyandaccuracyaregre a t ly reduced. A fterthenutsaregraded,theyreu su a llyst e rili z e dtoreducetheba c t e riaandE.Colicountu su a llypresentin

ha rve st e d pecans.Beforethenutsarecracked,w he t he rtheyaretakenfromthereceivingpla t f ormortemporarystorage,theyaresoakedinvatsortanksofchlorinatedw a terw h i chthetriplefunctionofs ter i l i z i ngthenuts,softeningthenutshell,and makinghenutkernelmoreplia blesothatitw i l lbelesslikelytobreakorshatterduringhecracking process. Therearemany variationsoftiming,w a t e rtemperature,andofdisinfectants;someplantsusealivesteam bath. How ever,theneteffectishesame. Themoisturecontentofthenutsisi ncr eas edfrom4.5toabout8percentA fterconditioning,thenutsareco nveyedtohoppersw h i c hfeedthecracking T nes emachinesposit ionthenutsindividually,andauto mati chammersstrikeendssimultaneously.he crackednutsdroptoconveyorbeltsw h i c htransporttotheshelling machines.S ever alprocessesareu se dtoseparatethepe c a n ker nel sfromtheshells. T neprevalentcombinesforcedairan dscreens.nadditionalrefinementisaflotationerysmallpiecesofkernelsareremovedfromtheshellsbecauseoftheinspecificgravityofkernelsandshells.Theshelled pecansarepa sse doveraseriesofshakerscreensw i t hholesofpro-

largerdiameter. Herethemeatsareseparatedaccordingtosi z eofhalvesnd pieces. T h er eare8differentsizesofhalves,dependingonthenumberofhalveserpound,and8s i z e sofbrokenorcutpe c a npiecesrangingfromthelargest,mamnothtothesmallest,meal(figs.1and2).

Afterthekernelshavebe e nsegregatedintothevarioussi z esofhalvesand piecesareconveyed todryers. M o istu recontentofthemeatsisreducedfromabout8toa pproxim a t e lyh percent. D ry in gmachinesvaryinformandcapacities,butusehori z on t a lscreensthroughw h i c hw a n nairiscirculateduntilthenutmeatsre a c he dtheproperdryness. 2 /OnlysixshellersusedFederalgradesinpu rc ha sin gpecans.ourteenusedgrades.heremainingfirmsboughtonaveragecropquality,""estimatedand"weightofb ag . "3/Ua d e rsc ore dfiguresinparenthesesrefertoitemsinLiteratureCited,page27.

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T o p p e ra l v e s Above750Count M e d i u ma l v e s Approx.50-650 L a r g ea l v e s Approx.450-550

E x t r aa r g ea l v e s Approx.50-450 J r .a m m o t ha l v e s Approx.250-300 M a m m o t ha l v e s Approx.200-250

Figure1-Some popularsizesofpecan halves(actualsize)- 4 -

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PECANPIECES

^o.

M e d i u mi e c e s a r g ei e c e s

wijX .

x t r aa r g ei e c e s M a m m o t hi e c e s Figure2-Some popularsizesof pecan pieces(actualsize)

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Thenutmeatsareconveyedonm ov in gbeltsfromthedryerstosortingtables.H er eworkerssortan dgradeaccordingtocolorandpic koutdefectivekernelsandpiecesofshellmissedinthepreviousprocess. Somemorem ode rnplantsalsohaveelectriceyem a c hin e sforadditionalsorting.Theshelledandgradedpecansarem ove donconveyorsoringa lv a n i z e dstoragecansd ire c t lytothepa c k a gin gstations. Thebulkcontainersmostw i delyusedarecorrugatedcartonslin e d w i t hoil-resistantpaper. Thenetw e ightofnutsinthesecartonsrangesfrom25pounds(form a m m ot hhalves)to50pounds(forgranulesandmeal)^but

averagesabout3 0pounds. Someplantsalsopackagepe c a nkernelsinresalepackages.Cellophanebags^k ouncesto1poundsandvacuumcansarepopular. Variations

Thereisconsiderableva ria t ioninsi z eofoperation^methodsofpre pa rin g pecankernelsformarketândinthedegreeofa u tom a t ionoftheoverallprocess. Oneoftheplantsincludedinthisstudy wasa"hand"operationinw h i c hallofthecracking^shelling^sortingândgradingoperationsw e reperformedbyhand.Otherplantsw e r ere la t iv e lynewand w er eh i g h l yautomated. Tnepecansw e renot

touchedby h andduringcracking^shellingând packaging. Wit htheexceptionofsomefinesortingînw h i c honlydefectiveoroffcolornutm e a t sw er eremovedâllofthehandling^conveyingândshellingw asdoneautomatically. Somefirmsw e r elessh i g h l ym ech ani z ed .andlaborw asusede xt e n siv e lyinsortirgandgradingâ lt hou ghconveyorsw er esometimesusedtom ovenutsfromoneplantprocesstoanother.D e g r eeofautomation andi nves tmentinplantandfacilitiesisa ssoc ia t e d w i t h(l )thelengthofseasontheplantoperatesâ nd(2 )thepe rc e n t a geofthefirm'stotalincomederivedfromthepe c a nenterprise. H i g h l yautomatedfirmsu su a llyshellpecansthroughoutth eyear. T nei rprin c ipa lincomeisfromsalesofpecansan drelatedproducts. Smaller^lesshighlya u tom a t e dfirmsu su a llyareinthepecans h el l i ngbusinessonlyduringthepeakseasoninNovemberandD e cemb er . Incomefrom pe c a nsalesisana u xilia ryorsupplementalincome. Otherbu sin e sse sengagedinbypecanshellersincludeseedan dfeed^realestate^scrapmetal^candymanufacturing,andfarming.

IN D U STR YL OCATI ONPecanshellingandproc e ssin gplantsarelocatedthroughoutthepe c a ngro win g belt,andinSt.Louis,Chicago,andPittsburgh. Thegreatestconcentrationsoffirmsareintheareasw h e r eproductionisheaviest. T w e n t yshe llin gfirmsw er ein t e rv ie we din

Georgiaand1 3inTexas. TnetotalnumberofaccumulatorsandshellersinthevariousStatesandthenumberofshellersin t e rv ie we dduringthis surveyares h o w nintableyN U M B E RAN DSIZEOFF I R i V L S

The7^firmsforw h i chtherew er eusablequestionnaires,w er ed iv id e dintofivesi z ecategoriesa c c ord in gtonetvolumeofsales. Netvolumeofsalesisthetotali n-s h el landshelledsales(onani n-s h el lequivalentbasis)lesssalestoothershellersandprocessors(table2 ).k/ Accumulators purchasei n-s h el lnutsfromsmallerbuyersanddealers,andsellintruckloadlotstoshellersandprocessors.

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ab l e1 . - - N u m be rofpe c a nshellersand proc e ssorslist e dbyindustryandnumberinter-viewed^1 9 6 1 State :Li^ of accumulators, s h e l l e r s ,landpiDcessorsco mp i l edfrom

:variousindustrysourcesNumberofshellersa nd processorsfoundandi nter vi e w ed

NorthCarolina.SouthCarolina. GeorgiaFloridaAla ba m aM i s s i s s i p p i . . . . Ne wM e xic oTexasOklahomaLouisianaArkansasTennesseeKentuckyM issou riIllinoisP enns yl vani a . . .Total,

Firms~E~Ik2 831 8h 22682k 3131 11

136

Firms'1k

2 031 0311 362111P

7 7

Table2 . - - N u m be rofshellersand processors andnetsalesbysi z eoffirm,I 9 6 O - 6 ICode :Sizeoffirm

:b ynetsales Firms ; Net Sales1 /: M i l l i o n 1 , 0 0 0: pounds Njimber Percent pounds Percent

GroupI. . , ....5andabove 8 1 1 78,083 h o GroupII.... . . 3to4.9 9 1 2 3^A63 21GroupIII.....:1to2 . 9 2 0 2 7 3 ^ . 1 7 1 2 1GroupIV.... . . :. 5to. 9 19 2 6 1 3 . 6 3 6 8GroupV . . . .. . . below. 5 1 8 2k 3,555 2Total. Ik 1 00 16 3, 90 8 1 0 0

1 /In-s h el leq u i val entbasis.

T he8largestfirmsdidalmost50percentofthepecans h el l i ngandproc e ssin g intheI 9 6 O - 6 Iseason,and3 7firms(orhalfofthefirmssurveyed)did9 0ofthebusiness. Thejk firmssurveyedaccountedforalmostl6 4m illion poundsfpecans. USDAestimatedgrowerssoldatotalofI 7 6 . 5m illionpoundsofin-shelltoalloutletsduringtheI 9 6 O - 6 Iseason.T henumberoffirmsapparentlyhasdeclinedinrecentyears,andthesuccessfulre m a in in gintheindustryhave p r o w n . Asrecentlyasthe1 9 3 0 ' s ,thebulkof ttecropw assoldin-shell,andthes h el l ed p ecansw er eshelledb y hand. "Priorto

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1 9 2 0 ,few pecans w e r econsumedcommercially andthoseenteringtheedihletradew er ein-shell/'a c c ord in gtoWoodrof fand H e a ton(6).slateas1 9 3 1 ^J o nesandChilds,inth ei rco mp r eh ens i vestudy madelittlem e n t ionofs h el l edpecans,anddevotedonlyf o \ i rparagraphstothepecanshellingindustry(2).hey e st im a t e dthatshellersha n d le da pproxim a t e lykO m illionpoundsofin-shellpecansor58percentofthetotalpe c a ncropinI 9 2 8 .

Thenumberofpecanshellinga n d proc e ssin gfirmsincreasedgra du a llyduringthe1 9 3 0 ' s . Increaseddemandsfors h el l edpecans andh i g h erpricesencouraged morefirmstoentertheindustry.ra pidincreaseinthenumberoffirmstookplacei mmedi atel yf ollo win gWorld Wa rII. Thenumberoffirmsoperatingproba blyreachedapeakduringtheI95O-55periodand has graduallydeclinedsince. Thedeclineresultedpa rt ia llyfromthe1 9 5 5cropofpecans,w h i c hw asseverely u n d e re st im a t e d andover-priced. Severalfirmscontactedduringthesurveyi ndi catedtheyhadnotshelledpecanssince1 9 5 6and w e renow buyers only. T nenumberoffirmsw asfurtherreducedbythehigh-pric e di 9 6 0crop,low1 9 6 1pricesforshelled pecans,and therecordcropofI96I,w hic hfoundmanyshellersw i t hanexpensiveI 9 6 Ocropofp ecansstillonhand.

D e spit etheriseandfallinthenumberofpecans h el l i ngfirmsintheindustry,theproport ionofthepecancropshelledcomjnerciallyhass teadi l yincreased. Thelargestincreasesh aveoccurredsince1 9 ^ 6 . Inthe1 9 5 0 -5 2 period anestimated2 5percentofthetotalcropw asm a rk e te din-shell,b utinI 9 6 O - 6 Ilessthan1 0percentofthepecansenteringcom.nercialchannelsw asmarketedin-shell. Thisdoesnotinclude,however,pecansusedonfarmsorsoldorgivena wa y byfarmers. ArecentsurveyinSouthCarolinaindicatesamuchlargerprodu c t ionofp ecansinthatStatethanof f ic ia llyreported.ostofthea dd it ion a lpecansareprodu c e donnonfarmlots,however,anddonotmoveintocommercialchannels( 5 . ) .CIL^mACTERISTICSO FPECANS H E L L I N G AN DPROCESSI N GFIRi^^

Pecanfirmsva ry widelyinsi z eandorganization. Someofthelargerfirmsaresubsidiariesofl ar g efoodcorporations.a nyofthesmallerfirmsshellp ecansasasupplementtoo th erenterprisesw h i c hrangefromrealestatetoscrapmetal. Tne smallfirmsoperateonlyafewcrackingmach i nesandsellmostly tolocalaccounts.

BusinessO r g ani z ati o nsAbou thh percentofthepecanshellingandproc e ssin gfirmsw er ecorporations(table3). O nl ytw ocooperativesw er eactiveinthepe c a nshelling businessinI 9 6 O(althoughmany morecooperativesw er eaccumulators). Oneofthecooperativesw asinGroupI(thelargestfirms)theotherinGroupV. TheGroupVcooperativecould beclassifiedinothers i z egroupsinotheryears,dependingonthes i z eofthepecan crcp

initsarea.Partnerships w e rethel eadi ngtypeofbusinessorga n i z a t ionforfirmsinGroupI i n ^accountingfor45percentofthetotalforthegroup. Overha lfofthepartnershipsintheindustry w e reinGroupIII.About3 0percentofthefirmsinterviewed v j e r e proprietorships,butmostofthesew er eGroupVfirms,orthosesellinglessthan5 0 0 , 0 0 0poundsofp ecansinI96O-6I.Ing ener althesefirmstendtopart-timebusinesses.

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3.--Numberofpecanshellersand processors^by ownershipcharacteristicsandsizeoffirm,I96O-6IBusinessorganization

ooperative.... orporation....PercentoffirmsCooperative.... Corporation....

Firms215

Percent251263

FirmsizegroupII III

Firms21

Percen t2 21 16 7

FirmsIV V

Firms FirmsTotalFirms

k k 3 239 3 2 IT- 1 27 12 2 32

Percent Percent Percent Percent2 0 2 1 72 30^ 5 1 6 1 1 2 3_ _ 6 33 5 63 1 1 kh

AgeofFirmsTheaverageageofallfirms w as2 3years. FirmsinGroupI averaged 22yearsofage(tableh , Firmsin Group V averaged 2 1 yearsofage.lthoughfirmsi nGroupIranged from5to68 yearsof age,firmsthatreportedbeingin businessonly 5and6years wereactually reflecting recentacq^uisitionsof firmsthathadbeenin businessmuch longer.

Table^.--Ageof pecanshelling andprocessingfirms,bysize,I96O-6IItem GroupI roupII GroupIII : GroupIV Group V

Average..Range....Years2 2 . 15-68

Years25. 111-50Years27.94-72

Years2 0 . 13-55

Years2 1 . 25-^0

Facilitiesand TheirUseSizeof plantsi soften measured by thenumberofcrackingmachinesthe planthasavailable. Thecapacity of thecrackingmachinesvaries withthetypesandsizesofnutscracked. Estimatesrangedfrom62to9 0 pecansa minute. Otherestimates,onaper pound basis,averaged 50 poundsof pecans per machinehour. Thenumberofcrackersavailableinthefivesizegroups,theamountofin-shellnutscrackedin I96O-6I,andthepotentialcapacity areshownin table5 Theaveragenumberofcrackersinthefivesizegroups masksthe widevariationsin plantfacilitiesavailable. Someplantsin GroupII andGroupIIIh ad morecrack-ingmachinesthan plantsin GroupI . Onefirmin GroupIII hadmorecrackingmachinesthan anyof theotherfirmsexceptfor tw oof thelargestinGroupI . Thus,the widevariationsin physicalfacilitiesindicate that,accordingtothesizecategoriesusedin thisreport,thenumbersoffirmsin thethreetopcategories mightchangeslightlyfrom yeartoyear. Tnerateof useoffacilitiesandsizeoffirmislimited by the

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T a l D l e5.--Numberofcrackers,computedcapacity,and actual outputof pecanshellers,bysizeoffirm,I96O-61Sizeof ; C r a ckers Computedcapacity l/

Actualoutputfirm Total ; Perfirm Total :Aspercentage: ofcapacity

GroupIGroupIIGroupIII....:GroupIVGroup V: Number72 750841 11 9 7 Number9 1563 7221 1 1, 0 0 0poimds1 16 , 3 2 08 1, 2 8 01 1 9 , 0 4 070,08034,720 1, 0 0 0pounds69,6083 3 , 2 1 730,4691 1, 2 4 83 , ^ 2 3 Percento412 61 61 0Total2,585 - - 421,44o 1^7,965 35

1/Computed atrateof50 poundsofin-shell pecansper hour,80 hours per week(two8-hourshiftsperday--40 weeksper year).amountofcapitalavailabletothe managementfor procurementofin-shellnuts. Inyearsof highin-shellnutprices,firms maybuyonlyenough tofulfillcomjnitmentstor e g - a l a rcustomers. In yearsoflow prices,they may purchasein-shell nutstothelimitof theirfinancesinthehopeofcompetingforadditionaloutletsorholding thenutsincoldstorageuntilthenextyear when prices mightbehigher.

Ini960,187.5million poundsof pecans wereproduced. This w asa largecrop.Priceswere high,however,becauseof asmallcarry-overfrom the1959crop,estimatedatonly l45million p o ' - o n d s . High pricesforin-shell pecansand thedropin pricesforshelled pecansin theterminal marketscaused theindustry tooperateatonly about3 5percentofcapacityinI96O-6I. Firmsin GroupIoperatedcracking machinesonafull-timebasis,and,asagroup,averaged60 percentof theestimatedcapacity limits.OnefirminGroupI operated ata rateof1 1 1 percentofestimatedcapacity.

Firmsin Group Vshelledpecansasasideline business. Thisgroupshelled only1 0 percentofthevolumeof pecansfor whichthefirmshadshellingcapacity,and noneofthefirmsoperated at morethan3 5percentofcapacity.Numberof Employees

The pecanshellingindustry providesemploymentfor many peoplethroughouttheSouth.ostofthese people,however,areemployed onaseasonal basis. Thetotalnumberof regularemployeesinthe74firms w as1,21 0,rangingfrom an averageof1perGroupV firm to1 02forfirmsinGroupI . Therewere3,l67seasonalemployees,rangingfrom anaverageof1 0 perGroup Vfirm toI50forfirmsinGroupI .i m i b e r s ofemployeesforfirmsin thevarioussizecategoriesareshownin table6 .

Thelengthoftimeseasonalemployeesworked\ A a r i e d widelyin allgroupsandrangedfrom 2 to1 1 months. Somefirmsreported noseasonalemployees butkeptthes . a m eforceemployed 12 monthsa year. Whilethedatadonotlend themselvestoexactcalculationsof labor requirementsto producea pound of pecan kernels,theserequire-mentscan beapproximated.

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PRACTICESFinancial andstorage practicesof pecanshelling andprocessingfirmsalso varywidely. Largefirmsare wellfinanced and areahleto purchaseandstorelargeinven-toriesofin-shell pecans. These may hecarried from oneyear tothenext. Smaller^seasonalfirmsusually lackcapital and mustselltheirshelled pecansduring thepeakholidayseason.

FinancingInventoriesTofinancetheinventoriesthat must he purchasedinthefall^shellersused theirownfunds,or hankfinancing hased on warehousereceipts,open notes,chattel mortga-ges,receivables,and realestate mortgages(table8 ) .ostshellerspreferred opennotesand weresuccessfulinobtaining them. Oftentheshelling planti saleadingindustryina town,and thefirm hasestablishedcredit withitsbank. Theleastdesirable methodsofobtainingfunds werethroughchattel mortgages,receivables,andrealestate mortgages. Shellerssaid thatthey resorted tothese methodsofobtainingoperatingcapitalonlywhenother methodsfailed.

Table8.--Numberof pecanshellersand processorsusingspecifiedmethodsoffinancinginventories,bysizeoffirm,I96O-6Il/Methodsof f i n a n c i n g ^ inventories SizeoffirmGroupI :GroupII :GroupIII GroupIV :Group V :otalOw nfundsFirms2

k2

Firms5h

Firms9 4

Firms57

Firms

92

Firms2 1Warehousereceipts.*ODennote2 238Other2/1 0Total1 1 12 1 8 2 0 9 11/Figuresdonottotal tonumberoffirmsbecausesomefirmsusemorethanonemethod offinancinginventories.2/Includeschattel mortgages,receivables,and realestate mortgages.

StoragePecanscan bestored eithershelled orin-shellforlong periodsof time under

refrigeration,andindefinitely whenfrozen. Shellers keeptheirsuppliesofin-shellnutsin unrefrigeratedstorageduring the winter months.* Astemperatures becomewarmer,in-shellinventoriesare movedintorefrigeratedstorage.ractically alloftheshelledpecansare placedincoldstorage*immediately aftershelling,butsomeforimmediatedelivery areleftunrefrigerated during the winter months.Despite theadaptability of pecanstostorage,fewfirmsowntheirownstorages.Firmsreported owning refrigeratedstoragecapacityfor29 million poundsofshelledpecans(table9). Firmsin GroupI accountingfor^8 percentof totalsalesownedalmost58 percentofthestoragespacein thepecanindustry. Firmsin GroupII had1 0 percentof thestoragespacebutrepresented 2 1 percentofnetsales. GroupIIIfirmsowned ITpercentof thestoragespaceand accounted for2 1 percentof thenet

sales. Thus,theamountofstoragespaceownedby thegroupsoffirmsi sroughly- 12-

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9 .--Refrigeratedstoragespaceowned by pecanshellersand processorsand numberoffirmsusing thisstorageforspecifiedperiods^bysizeoffirmÎ96O-6ISizeoffirm

Storagecapacity^shelled nutsUsuallengthofstorageShelled In-ShellLessthan6 months Morethan6 months Lessthan6 months Morethan6 months

I . .I I .III r v . V. .Total.

1, 0 0 0pounds2 , 9 0 05 , 0 6 53 , 8 8 5^ 1 5

2 9, 0 0 0

Firms1h 375

Firms751 577

2 0 k\

Firms167k5

2 3

Firms731 19kh

1/Storagetimedependsonsuppliesandmarketsituations. In yearsofshortcropsnd high prices,pecansarestored averyshorttime. In yearsof largecropsand lowpecansmay becarriedfrom oneyear tothenext.

tothevolumeofsalesforthegroup. However,mostofthestoragespacesownedby afew firmsineachgroup.llfirmsrented refrigeratedstoragespace,locallyorin majorcities,whethertheyownedstoragespaceornot.Whetheri ti slessexpensivetoownorrentstoragespacei sdebatable. The position offirmsinobtaining andcarryingquantitiesofnuts,however,isenhanced by theavailability of adequaterefrigeratedstorage.Theamountof pecanscarriedinstoragefrom one yeartothenexti simportanttoheindustry.n19^8,theDeciduousFruitand Tree Nut Advisory CommitteerecommendedtheU.S.Departmentof Agricultureconductsurveyseach yearasof June30 t otheamountsand kindsof treenutsstored bothshelled andin-shell.heseincluded pecansfrom 1 9 ^ 8 until1953,when they werediscontinued duetolackfsupportfrom the pecanindustry.hesurveyscontinuetodeterminetheamountsoffilbertsândwalnutsincommercialstorage.Thecarryoverof pecansfromoneyear tothenextoffersthe mostimmediate possi-forstabilizingpecan pricesand effecting theorderlymarketing of pecans.informationisneededconcerning theannualcarryoverof pecanstocks,bothncomîercialandin privatelyownedstorages.heamountofold-crop pecansinstor-

geoftenmay affectpricesfornew-crop pecansas muchasthefallcropforecasts.PROCUREMENT

.ProcuT'ementofin-shellpecansi samajorproblemof pecanshellersand processorsn theearly days,shellers,withfewexceptions,werecontenttopurchaseandshell process pecans produced and broughtin tothemb y localgrowersand dealersintheirarea. Increased mechanization of theshelling processresultedinincreased andefficiency,andnowshellerscover widerareasto procuresufficientquanti-of nuts. "Wenowshellmorepecansin aday than w eshelled during thefirstofouroperationin 1937- During thisfirstyear'soperation,w e had onefull-employeeandpaid thewomen workersona per pound,piece-work basis.hatanowl"( 3 )

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Too b tai nthelargersuppliesofnutsneededforacontinuous,economics h el l i ngoperation,largershellershavefounditnecessarytoes tab l i s hsi z a b lean doftenfar-flungpurchasingoperations. Theseu su a llytaketheformofinformalarrangementsw i t hlocalbuyersinvariouslocationsthroughoutthepecanbelt. Therearealso largeaccumulatorsofin-shellpecans,who,throughyearsofex p er i enceinthepecan industiy an d w i dek n o wle d geofproductionareasandlocalbuyers,areabletoobtainlargesuppliesof pecans. Theseaccumulators arecr i ti ci z ed by pe c a nshellersforaddi ngtothecostofin-shellnuts,buttheyare,nevertheless,theprin c ipa lsourceofsupplyformanyofthelargershellers(tablelO).ccumulatorsarepa rt ic u la rlysuccessfulinthew e st e rnregionsw h er ethep ecansgrow wildandareharvested la rge lyby ' t ) i c k e r s "w h oselltothenearestlocaldealer. Thepecansmay besoldtoseveralsuccessivelylargerlocaldealersbeforere a c hin gtheaccumulator.

Table1 0 . - - N u m b e rof pecanshellersandprocessorspre f e rrin gs p eci f i edsourcesforbu y in gin-shellpecans,bys i z eoffirm,I 9 6 O - 6 IS i z e Lo cal : Nooffirm Growers 1 dealers lAcGumulatois:preference Other1 / T o tal

Firms Firms Firms Firms Firms FirmsGroupI1 1 5 - 1 8 "GroupII2 2 k 1 - 9GroupIII . . . . 1 5 1 1 3 - 2 0GroupIVk 5 7 1 2 19GroupV6 - 6 h 2 18 T ot a l . . . . 14 1 3 33 9 5 Ik

1 /Includestruckers,brokers,andow nproduction.P ar ch as esofin-shellpecanshaveb eengrouped b y si z eoff i r m(tablell). FirmsinGroupIpu rc ha se dalmost78m illionpoundsor^5percentofthetotalpecanspur-chased byshellers.inefirmsinGroupIIpurchased3 9m i l l i o npounds,and2 0firmsinGroupIIIpurchased3 ^m illionpoundsof pecans.he7^firmspu rc ha se dslightlyover1 7 2m illionpoundsofp ecansfromtheI 9 6 Ocrop.

Table1 1 . - -P ur ch as es ofin-shellands h el l ed pecansby pe c a nshellersand processors,bysizeoffirm,I 9 6 O - 6 I

S i z e In-shell purchases She lle dpurchases T o talpurchasesoffirm andow nproduction ;(In-shelleq u i val ent) \ andow n produ c t ion1 , 0 0 0 1 , 0 0 0 1 , 0 0 0

GroupIpounds7 7 , 9 5 8 Percent pounds + 5 8 P er cent1 7 . 8 pounds7 8 , ^ 1 0 Percent1 ^ 4 . 9GroupII3 9 , 0 3 1 22 7 82 8 3 2 . 2 3 9 , 85 9 2 2 . 8GroupIII. . . . 3 4 , 0 0 5 1 9 . 7 1 , 0 6 2 4 1 . 3 3 5 , 0 6 7 2 0 . 1 GroupIV1 6 , 8 6 2 9 . 8 1 51 5. 9 1 7 , 0 1 3 9 . 7GroupV4 , 3 4 6 2.5 70 2 . 7 4,4l6 2.5T ot a l . . . 1 7 2 , 2 0 2 1 0 0 . 0 2 , 5 6 9 1 0 0 . 0 1 7 ^ , 7 7 1 1 0 0 . 0

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Shellersan d proc e ssorsre porte d purchasing n e a rlyl l 8 mi l l io npoundsofseedlingan d5^million poundsofimproved varieties.hesedatacomparew i t htheU S D Aestimateofn e a rly1 0 2mi l l io npoundsofseedlingsa nd75millionpounds fimproved pe c a n ssoldtoal loutletshyfarmers.hedataonpurchasesinthis

may heslight lyhighduetosomeunreporteddoublecountingof purchases(asoneshellerpur chasedin - she llpecansfromano th er .)

CropEstimatesOneofthem a j orproblemsinmarketingpecansisestimatingeachyearthetotalofpecanstobemarketed.heCropR epor tingBoa rdoftheU .S .Departmentof

releasesforecastsb eg i nningin Augustofthesi z eoftheforthcoming crop.ubsequentforecastsaremadeinSeptember^October^andNovember,andafinalfore-castismadeinD e cemb er . Informationfortheforecastsisobtainedfromfarmersa ndanchersw horeturnqu e st ion n a ire sconcerningtheconditionofthepe c a ncropintheirareas. InDecember,theproducersarere qu e st e d toes ti matethenumberofpoundsoft he yexpecttoharvestincomparisonwiththequ a n t ity ha rve st e dthepreviousear. T hef i nalestimateofthecropismadethef ollo win gJulyandisobt a in e dfromreportsofshellers,processors,a ndaccumulatorsconcerningthevolumeofpecanshandled.

Fore c a st in gthesizeofthepecancropisdifficult. S i nceaccuratecountsoftreenumbersoracresarenotavailable,theestimatesde pe n d toalargeextentonthecooperationofproducersand m a rk e te rsinsendingaccuratereports. D e s p i tethesedifficulties,theforecastsaresu rprisin glyaccurate. Shellers,w h oremembermostv iv id lytheoccasionalyearsw h e ntheforecastsmissedthefinaloutturnsubstantiall;>5e xpre sse dconcernoverthese"misses"andb e lie v e thattheforecastsw o r ktoth ei rd isa dv a n t a geonprices. Therearesomeindications,however,thattheU S D Aestimatesarec on sist e n t ly I c v T e rthanactualproduction. Chappell,inananalysisofcropestimatesandfinalproduc-t ionfortheyears1 9 3 7 - 57 ,foundthat"Themonthlyforecastsshowacleartendencyto

u n de re st im a t ef i nalprodu c t ion ."5/naddition,thisanalysisofofficialdataover-looksthefactthatpecansproducedin Kentucky,Tennessee,M issouri,Illinois,andIndi anaarenotincludedintheUSDAcropestimates. Itispossiblethattheindustry hasmarketedacropofover2 0 0mi l l io npoundsofpecansinotheryearS:^buttheofficialestimatehasbe e nlargerthanthatonly twice--in1 9 5 3a ndI96I.hileanofficialforecastofa2 0 0-mi l l io n-poundcropcausessomeconcernw i t h i ntheindustryre ga rd in gmarketoutletsandprices,pe c a nshellersassertthatalargercrop,c on sist e n t lyproduced,could bee f f ic ie n t ly marketed. Itw asin-d ic a t e dearlierinthisreportthattheindustryhasshellingcapacityforacroplargerthan2 0 0mi l l io npo^jnds.

Va rie t ie sShe lle rsinGroupIpur chasedn e a rlyha lfofallthes eedl i ngpecansand"blends,"(table1 2 )6/.h e yalsopurchased a pproxim a t e ly70percentoftheSchleys,apre m iu mva rie tywithahighpe rc e n t a gecrackoutand highoi lcontent.argeshellerspurchasedabout2 5percentoftheStuarts,thele a d in gnamedva rie tygro wnintheSoutheast.5/Chappell,J oeSenter.n An a ly sisofSomeEconomicFactorsAf f e c t in gtheM a rk e t in gofOk la hom a Pecans.n pu blishe d m a st e rsthesis,OklahomaS tateUniversity,M a y1 9 5 9 .6/Itisthecustominthepe c a nshellingindustrytohavefourcategoriesofpecans: Seedlings,Stuarts,Schleys,a ndBlends. Blendsincludeallotherimprovedvarieties.

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Ah i g h proportionofStuartpecansw aspurchasedbyshellersinGrou pV becauset he y tendtospe c ia li z eingiftpackagesa nd mailorderbusinesses.heStuartpe c a nhalvesaree spe c ia llysuitedforattractivepackagesof pe c a n meats.T ab l e1 2 . - - Pu rc ha se sofin-shellpecansby p ecanshellersandprocessors,by varietiesandsizeoffirm,I 9 6 O - 6 I

S i z eoffirm

; Stuarts ; Sc hle y Blends Se e d lin g ; Total

GroupIGroupIIGroupIII. . . .:GroupIVGroupV1 , 0 0 0pounds5, 0 7 56 , 2 5 6^ , 6 9 73 , 5 3 71 , 8 5 1 1 , 0 0 0pounds5,04553 36 1 353 92 9 0 1 , 0 0 0pounds1 0 , 4 8 33 , 5 6 85,4 8 14 , 2 9 047 0 1 , 0 0 0pounds5 5 , 7 5 + '2 8 , 6 7 52 3 , 2 1 48 , 4 9 61 , 7 3 5 1 , 0 0 0pounds7 7 , 9 573 9 . 0 3 23 4 , 0 0 51 6 , 8 6 24 , 3 4 6Total2 2 , 2 1 6 7 , 8 2 0 2 4 , 2 9 2 1 1 7 , 8 7 4 1 7 2 , 2 0 2

SourcesM o s tshellersinthethreela rge - si z ecategoriesdependedonaccumulatorsfortheb ulkoftheirpe c a nsupplies. Over50percentofthepecanspurchasedbyshellersinGroupIcamefromaccumulators(tableI3).muchhighe rpercentagew o uld havebe e nreportedfromthissourceexceptfortheinclusionofcooperativesandlargegrower-shellersinGroupI. Thesefirmslist e dtheirsourcesofsupplyas"growersatplantorbu y in gstation,""groweratfarm,"and"other."ostshellersreportedt he y prefertobuyfromgrowers,buthadtobuyfromaccumulatorstoobtainlargequantitiesofthesameva rie tyofnuts.

Ta bleI 3 .- - Pu rc ha se sofin-shell pecansfromvarioussourcesby pe c a nshellersandprocessors,bysi z eoffirm,I 9 6 O - 6 IS i z eoffirm

:Gro we rsat:lantoribuyingstation

Grower atfarm Localbuyers :Accumulators: Other1 / sources

GroupI. . . .GroupII..GroupIII.GroupIV..:GroupV . . . :

1 , 0 0 0pounds1 3 , 5 1 27 , 6 2 0^ , 1 6 7^ , 3 1 71,516

1, 0 0 0pounds1 3^017460 3129 1 8 7

1 , 0 0 0pounds1 4 , 4 5 01 1 , 0 2 06 , 6 4 45,55248 2

1 , 0 0 0pounds4 0 , 9 0 02 0 , l 4 2 2 0 , 6 5 54 , 2 4 51 , 1 3 9

1 , 0 0 0pounds7 , 75 0751 , 9 3 52 , 6 2 01 , 0 2 1

1 , 0 0 0pounds7 7 , 9 5 83 9 , 0 3 13 4 , 0 0 41 6 , 8 6 34 , 3 4 5

Total.: 3 1 , 1 3 2 2 , 4 3 9 3 3 , 1 4 8 8 7 , 0 8 1 1 3 , 4 0 1 1 7 2 , 2 0 11 /Includes"own production," "truckers,""auction,"an d"brokers.

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Firmsin GroupIIand III obtained the bulkof their pecansfrom accumulators.attheplant"and"local buyers" weretheprincipalsuppliersof pecanstoin GroupI V .irmsin GroupsIV andV also purchased approximately 25per-oftheirtotalsuppliesfrom accumulators.Regions

The4lshellersin theSoutheastpurchased almost6kmillion poundsof pecansl4). Tne2 3shellersinterviewed in theSouthwest boughtor produced 68 m i l l i o n Shellersin theCentral areapurchased almost^ 0million poundsof pecans.

l4.--Numberof pecanshellersand processorsandpurchasesofin-shell pecans,by regions,I96O-6]l/Region Purchasesand ow n productionImprovedvarieties Seedlings Total

2 / . ,3 / . h/ Number2 31 31, 0 0 0pound s3 2 , S ' 0 21 ^, 170

1, 0 0 0pounds3 1 . 1 3 21, 0 0 0pounds6 3T9 368,3673 9 ,9 0 1

Total. 77 5^,328 1 17, 8 7^ 172 , 2 0 2

1/Pecanshelling andprocessing plantsgrouped by regionstoavoid disclosing the ofindividualfirms.2/IncludesNorthCarolina( l ) .SouthCarolina( 1 + ) ,Georgia(20),Florida( 3 ) ,(lO),and Mississippi( 3 ) .3/IncludesLouisiana( 2 ) ,Arkansas( l ) ,Texas(13),Oklahoma( 6 ) ,andNew Mexico

h/ Includes Missouri( 2 ) ,Illinois( 8 ) ,Tennessee( l ) ,Kentucky( l ) ,and Pennsylva-a( 1 ) . Moreshellersarelocatedin theSoutheastthanintheotherareas,buttheaverageissmaller.he^ 1shellersin theSoutheastpurchased anaverageof 1 . 6millionofpecanscomparedwith an averageof3*0million poundsforshellersintheand 3 -1 million pounds byshellersin theCentral Region.Mostof theimproved pecansaregrownin theSoutheast,andshellersin thearea 3 3millionof the5^-iiiillion-pound total. Southwesternshellersused 1 ^ poundsofimproved pecans;overhalfcamefrom theshellers'own production.he bulkof the7millionpoundsofimproved varieties purchasedbyshellersin the Region w as processed forthein-shell trade.Thedissimilaritiesof theSoutheastern and Southwestern productionareasareby thesourcesofsuppliesforshellersand processors(table15). Accumu-arethe principalsourceofsupplyin all areas,butarelessimportantin thethanin other areas. Shellersin theSoutheastreported thatthey purchased2 3 millionpoundsofpecansfrom growersattheplantor buyingstations. In

heSoutheastern States,the bulkofthe pecansaregrown asacommercialcrop by w hoare membersof marketing organizationsor haveenoughsuppliestosellin1 7

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quantity directly toshellers. In theSouthwest,pecansareobtained fromseedlingtreesand often are marketedinsmalllotstothenearestlocaldealer. I tfollowsthatshellersi ntheCentralarea " b u y relativelyfew pecansfrom growers" b e c a u s etheyarenotlocated asnearthe majorcomnercial producing areas.

T a ' b l e15.--Purchasesofin-shell pecansfrom varioussourcesby pecanshellersandprocessors,by regions,I96O-6IRegion Growersatplantorbuying s t a t i o n Growersat

farm Localbuyers AccumulatorsOtherl/ Allsources

Southeast..Southwest..Central,...Total..

1 ,0 0 0pounds2 2 , 90 16,8631 ,36 73 1 , 1 3 1

1 ,0 0 0pounds50

2,439

1, 0 0 0pounds1 2 , 6682 5 , i + 8 0

1, 0 0 0pound s2 i 7 5 S 527,7 1 7_3M79

1, 0 0 0pounds1, 0 9 08,256^,055

38 , 1 ^8 87,082

1, 0 0 0pounds6 3, 93 ^68,3663 9, 90 11 3 , ^ 0 1 172 , 2 0 1

1/Includestruckers,auctions,othershellers,brokers,and ow nproduction.Useof Grades

Onlysixshellersreported using Federalgradesin purchasing in-shellpecans (table16). Fourteenadditionalshellersusedprivategrades whichincluded anevalu-ationof thekernel yield of thenuts. Theremainingshellersbought pecansby"averagecropquality,""visualinspection,""dealer'sreputation,""by area,"and"weightofthe bag."omeshellersreported theydid notseethepecans until.theywerebeingshelled.TableI6.--Numberof pecanshellersand processorsusing Federalorothergradesinbuyingin-shell pecans,bysizeoff i n r i ,I96O-6I

Grade SizeoffirmGroupI :GroupII :GroupIII:GroupIV ;Group V :otalFederal. Firms2

6

Firms

15

Firms222Ik

Firms1k 212

Firms

11 1

Firms6Private, IkAverageNone1 / .cropquality. 648Tota 8 9 2 0 1 9 1 8 Jh

1/Those w horeported"none" boughtby"personalinspection,""yield,""personaljudgment,"and"weightof bag."

Much thesamesituationexistsinselling pecan kernels. M o s - tshellerssell pecanhalvesaccording tothenumberof halves per pound,and thesearegraded according to

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"standard/'or"ambers." fewshellersreported u sin gthemiddlegrade^owever,considerablevariationoccursinthenamesusedbyshellerstothevariouss i z e sofha lve sandpieces.

M o stshellersi ndicatedthattheU. S .gradesforin-shellpecansaresuitableforofi n-s hel lpecans,butarenotab as i sforbu yin gs h el l ingstock. S h el l i ngmustbeevaluatedontheb as i sofyie ldofkernel. Som eshellersi ndicatedcustomersforshelled p ecansdemanded muchhigherqualityker nel sthansp ecifiedntheUnited StatesS tandar dsforShe lledPecans. TheS tandar dsal lo w broadcolorand0 . 2p er centshelltolerance. Someshellersb el i eveU. S .No.1pecans bela be led"F^eeofS h el l ."

Un itedStatesS tandar dsforgradesofshelledandin-shellp ecansareavai lab l eortheuseofthepecanindustryonavoluntaryi nsp ectio nbasis. Itistherespon-oftheindustrytoinitiate procedurestochangethestandardstosatisfyindustryneeds.

S h e l l e dPecans Thereislittletr afficins h el led p ecansamo ngshellers. Only8 7 7 , 8 6 0poundsofmeatsw er ee xc han gedduringtheI 9 6 O - 6 Iseason. Mo s tofthesetr ansactio nsw er eratherthansalesorpurchases. Convertedtoani n-s hel l-equivalentbasis,thequantityi nvo lved w as2 ^ m illionpounds,oronlyabout1p er centofthetotal

ofp ecansincommercialchannels.

SALESForthei ndividualsheller, salesoutletsforshelled p ecansarehighlyvariable.

mustpurchasealloftheirin-shellsuppliesduringtheshortharvestperiodnNo vemb erandDecember,andcompeteformarketoutletsforp ecanmeatsduringthemonthsoftheyear. T hefinancialburdenof thein-shellinventoryandtheforw o r k i n gcapitalleadstosharppricecompetitionamo ngshellersforoutletsorthes h el led pecans. Buyersof pecanmeats,ontheotherhand,area wa reofthisntensecompetitionandarequicktoshiftamo ngsupplierstoobtainp ecansatlo we r

Fort hisreason,p ecanshellersareco nfro ntedeachyearw i t hanuncer tain market.oranyi ndividualsheller,thep er centageofhiss h el led p ecansthatgoestoeachofhevariousoutletsmayvary w id e ly . Oneyear,theb ulkofhi sp ecanvolumemightbesoldtoalargeconfectioner;thenextyear,perhapslargeb aker iesarehismajo rcustomers. S mal l ershellersareco ncer nedlessw i t hthispro b lem b ecausetheir pri-outletsarelo calbakeries,candymanufacturers,ma il-ordergifts,andchurchorserviceor gani zatio nfund-r ai s ingsales. Thus,salesp atter nswithintheindustryfromyeartoyear,buttheoverallpatternofsalesfortheentireindustryiselativelystable.ni ncr eas ingportionoftheto talpecancropisshelled,andofthetotalp ecanmeatsusedb yvariousoutletsarer atherfixed.ThedatainthissectionarebasedonsalesoftheI 9 6 Ocrop,pluscarryoverfromhe1 9 5 9crop.henshellersw er enotcertainaboutquantitiessoldtooutletstheyaskedtoestimatep er centagesofsalestovariousma joroutlets. T h esepercent-ages w er eapplied totheamountofpecanmeatsavai lab l eforsale(fig.3)* The9 6 O - 6 Icropw aslargeand high-priced. Hence,I 9 6 O - 6 Isalesdatami g htnotberepre-sentativeofsalesinotheryears.

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PURCHASESANDSAIESO FPECANSB YS H E L L E R S Accumulators

ANDPROCESSORS,1960-61 WholesalersRetailersTruckers,giftpackers,therBakeriesandbakeryupplies

Confectioners

U.S.DEPARTMENTOF AGRICULTURE

Retailers

GrocerywholesalersIcecreammanufacturersMixersandsaltersSRepockersMoilrderandotherGiftpackers

NEC ERS1200-62 6) ECONOMIC RESEARCH SERVICE

Figure

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OutletsforShelledPecansBakeriesand bakerysuppliersaretheprincipaloutletsforshelledpecans^ using

38 percentofthetotal(tahleI7). Confectioners " b u y approximately 2 0ofall the pecansshelled^while retailgrocersbuy 1 1 percentand wholesaletake 9percent.

I7.--Percentageofshelledpecanssold tovariousoutletsbyshellers^1950-52and 1 96 0-6 1

OutletandsaltersgrocersgrocersceCream manufacturers.packersTotalsalesSalesfor1 96 0-6 1Percent2 0691 171h h Estimatedsalesfor1950-52veragePercentw2 0712121 00 1 00

Salesto households(throughgrocery outlets)weregreater thantheestimatedfor1950-52,probably reflecting theimprovementsin packagingmethodsandthathave beenmadeduring thepast1 0 years k), Salestoicecreammanu- wereabouthalftheestimated averagesalesforI95O-52. Unstablesuppliesnd unpredictable pricesmay haveled tothecurtailed useof pecansinicecream Thevolumeoficecreamproducedincreased during this period.pproxi- 6 5percentof theshelledpecanssold toretailerscamefrom firmsin GroupI18). Thisagreeswithasimilar trend forfruitsand vegetables. Chainstoresprefertobuy directlyfromshippers w hocansupply largequantitiesofa product.

OutletsforIn-shell PecansTheprincipalcustomersforin-shell pecansfromshellersand processors wereshellersandprocessors(table I9). They boughtalmost5^ percentof those Theother majoroutletsweregrocerywholesalers(25.3 percent)and retailerspercent). Large pecan-shellingfirms madefewsalesofin-shell pecansinI96O-1 . Only threeoftheeightfirmsinGroupI handled anyin-shellsales.ostof the nutsales wereby accumulators w hoalso hadshellingor processingoperations,r byprocessors w ho wereusuallysubsidiariesofin-shellnutmixersand wholesale T b i esheller-accumulatorssold theirin-shell nutstoothershellersandthe processorssold their pecanstoretailand wholesaleoutlets.

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hebrokersellsthep ecansandhasthemdellvereLdfromstorage.hesJiellerp aysthestoragechargesandafeeofabout2p er centofthesalespricetothebroker.2 0 . - - T o t a landnetsalesbypecanshellersand processors^in-shellequivalentbasis,1 9 6 0 - 6 11 /

S i z eoffirm T o talsales

Salesto: othershellers:and pro ces so r s ;

NetsalesThroughb r oker s D i r ect Total

I. .II.IIIIV.V. .

Total.

1 000pounds39 85935 06817 013

1 000pounds3335 3968973 377860

000ounds.59921 07^19 8li8

7 0^71.^72

1 000pounds13.3891^.3236 5892 083

1 , 0 0 0pounds7 S 7 5 3 "3^,t33 ^ ,1 7 11 3 ,6 3 63,555

17^, 771 10,863 9 8 , 0 f O 65,868 1 6 3 ,9 081 /Netsalesareto talsaleslesssalestoothershellersand processors. Mo s tofthedirectsalesofp ecansbyshellersandprocessors w e r emadeunder

w i t hlargeusers. Contractsaremadeduringtheharvestseasonand u su allythetotal,orascheduleofquantities,ofpecanker nel stobedel iver edther emainderofthespringandsummer. Thecontractpriceisu su allythepriceatthetimeofthecontract.fterM a r c h1 ,astoragechargeofO. 5centerpou nd permonthisaddedtothecontractprice.

Contractsseemtober atherw e a kinstrumentsforshellers.l mo stal lcontractsapr ice-decl ineclause,w h i c hguaranteesagainstadeclineoft he irow nprices rthepr icesofoneormoreofthelargershellers. Suchcontractsareeas i lyb r okenthep^urchaser. H ecanrejectshipmentsofnuts,and mayresorttothisprocedurefthecontractpriceish i g h erthanthecurrentmarketprice.tt hispoint,however,

u su allyadjusttheirpricestocurrentmarketprices,particu larlyiftheisalargebuyer. Ontheotherhand,contractpricesareneveradju stedifthecurrentmarketpriceishigherthanthecontractprice. Theextenttoshellersfai ledtomakedel iver y w h encurrentmarketpricesroseabovecontractw asnotdetermined.

Salesby AreasSa le sofb o thin-shellands h el led pecansfollow p atter nsbasedonthetypesofprodu cedintheSoutheastandS o uth w es t(table2l). Forexample,shellersinthepr edo minateinsalesofnutmeatstoretailers,mi xer sandsalters,and mail-outlets.ecanker nel sfromtheimprovedvarietiesproduced princ ipallyintheareesp ecial lyattr activeandarepref erredinresaleitems. ShellersinheS o uth w es tledinsalesofp ecanstoconfectionersand bakeries,w h e r ethesmall,buthardtoshell,seedlingp ecaniswidelyusedas an ingredientincandyndbakedgoods. S h el l er sintheCentralareah aveequalaccesstopecansfromthew oma jorproductionareasandtheirsalesoutletsw er elessspecialized.h i g h er

of kernelssold byCentralshellers,approximately 2 0percent,w asinpackages.

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2 1 . S a l e sofshelledpecansby pecanshellersto variousoutlets,and in bulkandconsumer packs,byregions,I96O-6IOutletandpack Southeast Southwest Central Total

:,000 : ounds

Grocerywholesalers,258Retailers,709Mixersandsalters,683Confectioners,592Bakeriesandbakerysuppliers,9 06Icecreammanufacturers..:,1 3 1Giftpackers26Repackers56Mailorderand other, ^ 2 ^Total0,385

of pack:Bulk pack8,8 9 3Consumer pack, U92 1 , 0 0 0 1 , 0 0 0 1 , 0 0 0pounds pounds pounds2 , 258 1, 684 5,2002 , 1 3 1 1 ,8 0 2 6,6425 9 5 1 , 0 2 8 3 ,3 065,856 2 , 344 1 1 ,7 9 29 ,5^7 6,082 22,5351,4 30 1 , 3 3 4 3,895kl _ _ 7671, 256 3 9 2 2 ,60 4^ 151 1, 97423^ 1319 9103 603 1^^ 81712 U0U 2 ^13 58 71551 2077 508Nearly allofthein-shell pecans bought by wholesalersand retailerscamefromshellers,furtherindicating thepreferenceforimproved varietiesinoutlets(table22).

22.--Salesofin-shell pecansbypecanshellersandprocessorstovariousout-lets,by regions,I96O-6IOutlet Southeast Southwest Central Total

ruckersGift packersShellers,dealersandprocessors..Other1/Total1 ,0 0 0pounds^^^ 4 5172 760423,444773 1 , 0 0 0pounds3351 3 757,3701 67 1, 0 0 0pounds2 532 50507 1, 0 0 0pounds5,1063 , 1 * ^ 7471 0,86 34711,582 8, 0 14 560 2 0 , 1561 /Includesretailsalesatawnretailoutletsandsalestonurseries.

MAEGINSExamplesofmarketingcostsfor pecansareshown using aseriesofpossiblegrowerpricesforin-shellpecansof assumedqualities(tatle23).heshelling and marketing

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Table23.--Schedulesofshellers'break-even wholesale price per pound(shelledbasis)inNew YorkCityforGeorgiaStuartand Texasseedling pecansatvariousshelloutpercentagesand growers'in-shell pricesGeorgia Stuart pecans Texasseedling pecans

Costitem(shelled basis) 40-percentshellout 14-5-percentshellout 130-percentshellout 35-perentshellout25cents: 3 0cents: 3 5cents:0:cents: 3 5cents : 1 + 0cents :0:cents: 25cents: 30cents 25:cents: 30cents : 35centsCentsT2 5

8 . 5

Cents75.08.5

Cents7.58 . 5 :

Cents.77. 5

Cents7 7 .7. 5

Cents8 8 . 97 . 5

Cents66.76 . 3

Cents 3.36. 3

Cents: Cents71 . 45. 4

Cents85.75. 4

CentsG r ' o w e i ' S Drice100.0:

6 . 3 " 9 9 . 0

Accumulators'averagemargin l/5. 4Shellers 'kernelcost7 1 .07. 0 83.517. 03 h 9 6 . 01 7 .03. 4 74.21 7 .03 . 4 85.31 7 .0 96.41 7 .03-^ 73 . 01 7 .03 . 4 8 9 . 61 7 .03-^ 1 0 6 .31 7 .03 . 4 76.81 7 .03.^ 9 1 . 11 7 .03. 4 1 0 4 . 4Shelling an d overheadcostf average)1 7 .0Storage,interest,handling(average)3. 4Bhellers'costatloadingdock1 . ^3 . 0

: 2. 5

1 0 3. 93 . 02. 5

1 1 6 . 43.02 .5

:4. 6: 3 . 0: 2 . 5

1 0 5.73 .02 .5

1 1 6 . 83 . 02.5

93 4: 6.0

2 . 5

1 1 0 . 06. 02 . 5

1 2 6 . 76. 02 .5

97 . 2: 6. 0

2 ^ 5

1 1 1 . 56. 02 .5

1 2 0 . 0

1 2 4 . 8TransportationtoNew York(estimated)6.0Brokerageand sellingcost(1960-61 average)2/ 2. 5Shellers'break-evensellingpricei n New YorkCity6.9 i 0 9 . i t 1 2 1 . 9 1 0 0 . 1 . 2 1 2 2 . 3 :1 0 1 . 9 1 1 8 . 5 1 35.2 1 05 . 7 1 3 3 . 3

1/ Averagedifference betweengrowerand accumulatorin-shell prices was3 -^centsin Georgia and I. 9centsinTexas.2/The brokeragechargeis 2percentofth eselling priceandvariesaccordingly. InI96O-6I,th e brokeragechargeaveraged2 . 5cents.

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costsareaveragesofthosequoted " b yshellers.heassumed pricesforin - she llpecansarew i t h i ntherangeofaverageprices,slightlyl o w erthantheI 9 6 Oprices,butw e l labovethelowpricespaidfortheI 9 6 Icrop. Sincemostofthechargesareconstants,similarselling prices canbecomputed re a d ilyforanygivengro w e rpriceandshelloutpercentage.T heaccumulatormar g i nisassiomedtobethegrossaveragedifferencebe t we e n pricesshellerspaidtogrowersand prices pa idtoaccumulators. IntheSoutheastthisaver-ag ed3 . 4centsandintheSouthwestI. 9centsperpound.ostshellersreported th ey charged 2centsperpound abovetheirpurchasep r i ceonsalesofin-shellpecanstoothershellersorprocessors.eportedshellingando ver h eadcostsaver ag ed1 7centsforshellersinallareas,w h i l estorage,interest,and ha n d lin gchargesaver ag ed3 . 4cents. Sincemo s tpecansareshipped bytrucktothemajo rmarkets,andratesvaryw idely,thetruckratesfrom Atlanta,Ga.,andS anAntonio,Texas,toNe w YorkCityw er eused. Thebrokeragefeeof2percentofthesalespriceisstandardthroughouttheindustryan daveraged2 . 5centsperpoundof mediumsi z ep ecanh al vesinI96O-6I.Thecomputationsofm ar g i ns areforillustrativepurposesonly. ThemarketingchargesareaveragesfortheI 9 6 O - 6 Iseason.w omajorpointsareemphasized,howe-ver.First,thea sse m blycostforpecansisgreat.nincreaseof1centintheprocure-mentcostofin-shell pecansincreasestheker nelcostbyap p r o x i matel y3cents,dep endi ngontheshelloutp er centag eofthenuts. Secondly,theq u al i tyofthenutsashe lle rpurchases(a smeasured bytheshelloutp er centag e)isimportantindeter mi ni nghisse llin g price. Forexample,iftheshellerpays3 0centsperpoundforin-shellpecans,hiskernelcostis8 5 . 7centsiftheshelloutis35percent,butonly75centsiftheshelloutis4opercent.

C O NC L U S IO N SAtthegrowerlevel,thecompetitivesituationinthep ecanindustrycloselyresemblesthemo delof pure competitionpropounded bythecl as s i caleconomists.ttheshellerlevel,themodelsofoligopolyand mo no p o l i s ti ccompetitionareapproached.

(1 )Throughoutthegamutof marketorganizations,changesaretaki ngplace w h i chaffectthecompetitiverelationshipsw i th i ntheindustry.it hinthelasth years,tw oofthelargerp ecanshellingfirmshaveb eenpurchasedbylarge,multiproductfoodcorpo-rations.it hinthelast1 0years,cooperativesandgrower-shel l erfirmshaveb ecameimportantfactorsinthemarketingofs h el l ed pecans.h es echangesw i th i ntheindustryalsowillaffectthecompetitivep o s i ti o nofthepe c a nindustry w i t hothertree-nutindustries. Tocompeteeffecti vel y w i thothertreenuts,bot hdomesticandimported,thepe c a nindustryneedssolutionstoseveralproductionandmarketing problems. Ontheproduc-

tionside,perhapsthegreatestproblemistheb ie n n ia lproduction habit ofpecantrees.hew i d efluctuationsintotalproductionfromyeartoyearcreateh ar ds h i p sonp ecangrowersandseriousmarketingproblemsforshellers.dd it ion a lresearchisneeded tofindnewvarietiesoftreesand b etterculturalp r acti cestomi ni mi z ethew i defluctuationsinp ecanproduction.Onthemar keti ngside,oneofthemajo rproblemsofthepe c a nshellingindustryistheprocurementofin-shellpecans.hew i d eareasoverw h i c hpecansareproducedan dthelargenumberofpecangrowerswho marketsmalllotsi ndi vi dual l yresultinh i g h procurementcostsforshellers. T he secostsarere f le c t e dinh i g h erpricesforp ecanker nel sintheter mi nal markets.ddi ti o nalr es ear chisneededtofind w a ystoin-creasetheeff i ci encyofthefarmers'm a rk e t in gorofshellers'procurementpractices.

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Second,the pecanshelling industry needs to adopt wider useofgradesin bothand selling.hefarmerw hogrows high-quality pecansshouldberewardedor hisexpenseand efforts byhigher pricesfor his pecans.hellerscanshellhigh-pecans morecheaply thanpoor-quality ones;high-quality kernelsshouldbringhigher pricein theterminal markets.ut here,too,pecanshellersneedtoadopt uniformstandardsforthevarioussizesand gradesof pecan kernels.Third,the pecanindustry needs moreinformationconcerning themarketing ofpecansincommercial and retail outlets.hellersneed to know the prefer-ofconsumersforthe variousformsin which pecansaremarketed.heyalsoneedinformationconcerninghow the use ofpecans bycommercial usersandconsumersan beincreased.Finally,the pecanindustry needs more accurateinformationconcerning the produc- of pecansfrom year to yearand thetrendsinproductionforthe yearsahead. It needs,in associationwith annual production data,informationconcerningcarry-ofpecansfrom oneyear to thenext.fficient pricing of the pecancropeach requiresadequate knowledgeof thesuppliesofpecansavailable.Throughstudiesof growers,nurseries,andcommercial usersof pecans,abetternsightinto many of these problems will beobtained.esearch toimprovecropfore-

astingproceduresisalso underway.hereareother problems,however,thatcanbeolved onlybypeoplein the pecanindustry.hedissemination ofknowledgeconcern-ng thepecanindustryshould assistin thesolutionof many intra-industry problems.

LITERATKECITED(1 )ain,JoeS .1 953ricing,Distribution,andEmployment.ev.Ed.,73 2 pp.,illus..NewYork.( 2 )ones,S.A. Childs,V .C and others.1 932.n EconomicStudy of the Pecan Industry.ech.Bui.32^,U.S.Dept.Agr.,Sept.( 3 )uckey,Merion W.1 961 .arketing--S hellersand Processors,Proceedings.outheast.PecanGrowersAs s o c, March.{h Powell,Jules V. ,and Berberich,Richard S .1956.arketing Tree Nuts--Trendsand Prospects.ktg.Res.Rpt.139,U.S.Dept.Agr.,Oct.( 5 )hitworth,Coyle H.,and Pope,Lawrence H .1 961 .outhCarolina Pecan Survey--I960,.C .Crop Rptg.Serv.,U.S.Dept.Agr.incooperation withState Agr.Mktg.Com.and Dept.Agr.Econ.,SCAES,Cropand LivestockSer.2 3 ,June.(6)oodroff,J .G . ,and Heaton,E .K .1 961,ecansfor Processing. Bui.N.S.8 0 ,Ga.Agr.Exp.Sta.,March.

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