Agenda Item Wording:
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Pecan processing services - Approve an agreement with HNH Nut Company for processing, cleaning, dehydrating, and marketing of the City’s 2026 pecan crop.
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Agenda Date: 10/19/2026
Prepared by:
Rehana Lustyan, Senior Project Manager | Rehana.Lustyan@visalia.gov | 559-713-4176
Nick Bartsch, Public Works Director | Nick.Bartsch@visalia.gov | 559-713-4052
Department Recommendation:
Staff recommends that the City Council approve an agreement with HNH Nut Company for processing, cleaning, dehydrating, and marketing services for the City’s 2026 pecan crop, with payments structured according to the contract’s minimum-payment schedule, market bonus methodology described in Exhibit A, and all applicable assessments and fees, and authorize the City Manager to execute the agreement and any related documents on behalf of the City.
Summary:
The City owns approximately 445 acres of pecan orchards managed under a farm management agreement with A&K Precision Management (A&K) (awarded March 3, 2025). While A&K coordinates and performs all farming operations, the pecan processing (consisting of cleaning, dehydrating, shelling, sacking, fumigation, marketing, and shipping), is performed under a separate City contract and must be in place prior to harvest. HNH Nut Company has processed the City’s pecans since 2018 and provided consistent performance, proven experience, and reliability.
This item is presented ahead of the broader Westside Farming update due to the operational urgency of securing a processor contract in time for the 2026 pecan harvest. A comprehensive update on the overall Westside Farming operations will be presented at an upcoming meeting.
Background Discussion:
The City’s pecan orchards are managed under a farm management contract with A&K Precision Management (A&K), awarded by City Council on March 3, 2025, under RFP No. 24-25-02. Under that contract, A&K manages irrigation, pruning, fertilization, pest-control, harvesting, and general orchard operations, but for transparency, processing and marketing remain under a separate independent contract.
The City’s pecan orchards have relied on a processor to clean, dehydrate, shell, package fumigate, market, and ship annual harvests. In 2018, following late season changes in food safety regulations, the City entered emergency agreements with HNH Nut Company (operating at the time as Hamilton Ranches) and Naked Nut Growers so that each entity could process half of the City’s pecan crop. These agreements were recommended by local growers and were executed due to regulatory urgency and limited time to procure processor services. In 2019 and 2020, HNH was contracted through the City’s farm management contractor.
However, in 2021, the City competitively selected and has contracted directly with HNH Nut Company for processing and marketing services of its pecan crop under an auto-renew agreement. In early 2026, the City put out a Request for Proposals (RFP) for the lease of the pecan orchard to consider alternative options that might reduce the City’s ongoing liability and provide a more secure revenue source. To comply with the auto-renew provisions of the prior HNH Nut Company contract, and to preserve the City’s option to explore alternatives, the City was required to opt out of the contract by February 28th. On February 19, 2026, the City elected not to renew the HNH contract for the 2026 crop year. Unfortunately, the City received no proposals under the Pecan Lease RFP, and since that time, the City’s contracted Farm Manager, A&K began reviewing the City’s processing options to maximize the City’s return on its crop.
Processor selection directly influences harvester availability because harvest crews are often tied to specific processors or limited processor groups. A&K identified only three other processors that were open to receiving pecans during the 2026 season, located in Arizona, New Mexico, and Georgia. A&K stated that these alternatives were not considered economically practical for the City due to substantially greater transportation distances and significantly higher freight costs. This concern is particularly significant given the sharp increase in diesel prices during 2026 and the resulting impact on agricultural transportation costs throughout the Central Valley.
A&K has advised that, given the urgency of securing processing capacity, the limited number of processors accepting pecans, and the increased cost associated with transporting the crop to out-of-state facilities, HNH was determined to be the most immediately viable option under the circumstances. A&K further stated that these conditions significantly restricted the City’s ability to negotiate more favorable pricing or terms with competing processors.
Therefore, A&K’s recommendation to proceed with HNH Nut Company for the 2026 crop year is based on limited processing capacity statewide and the need to secure processing capability for the City’s pecan crop. While A&K previously advised the City to opt out of the prior HNH auto-renewal while the City explored alternatives, A&K has confirmed that HNH is prepared to accept the updated agreement immediately, while other potentially viable processors are either unavailable or not accepting additional volume due to current environmental and operational constraints affecting nut production across the region.
City Staff and A&K worked with HNH to improve and clarify the terms of the prior agreement to address minor concerns and ambiguities. The updated HNH contract incorporates all requested items from the City and A&K, including maintaining independent third-party inspection, increasing to a $1.20 per pound minimum payment, separate and more thorough accounting of the City’s crop, clarification and documentation of all expenses and deductions, including the federally mandated $0.03 per pound marketing assessments, and full bonus-settlement transparency supported by HNH’s provided bonus statements.
Approval of this processor agreement ensures timely processing capacity, dehydration scheduling, grade reporting, and market placement for the City’s 2026 pecan crop.
Fiscal impact including annual maintenance and operating costs:
Due to the variability of prices based on the quality of the crop and current market conditions, the exact fiscal impact is unknown. However, past revenues are listed below for reference. Given the guaranteed minimum payment of $1.20 per pound, this agreement is expected to result in profits that exceed $100,000 and therefore requires Council approval. Costs associated with processing, cleaning, dehydrating, grading, and settlement will be coded to the Wastewater Farm Division. Likewise, revenues associated with the sale of the processed pecans will be credited to the same account.
|
Crop Year |
Pounds |
Revenue* |
|
2021 |
373,311 |
$ 735,519.01 |
|
2022 |
442,614 |
$ 627,887.22 |
|
2023 |
417,667 |
$ 727,158.30 |
|
2024 |
354,315 |
$ 476,382.33 |
|
2025 |
609,832 |
$ 1,085,396.18 |
*Net Revenue from processor does not include farming expenses.
HNH’s payment schedule pays growers in the year following harvest, which means the payments issued in 2026 reflect the final settlement for the 2025 crop rather than the 2026 crop. Payments for the 2026 crop will occur during 2027 in accordance with HNH’s standard February, April, and June payment structure.
2025 Processor-Related Costs Summary
To provide additional context and clarity regarding the City’s net pecan-program revenues, the following section summarizes the gross income, processor-related expenses, and final revenues received from HNH Nut company for the 2025 crop year. These historical costs are for reference and may vary in the upcoming 2026 harvest, based upon numerous variables related to crop volume, quality, market conditions, and actual processing costs. These expenses are also separate and distinct from the City’s farm-management expenses for the pecans.
For the 2025 crop year, the City delivered a total of 609,832 pounds of in-shell pecans to HNH. HNH reported a Gross income of $1,490,272 related to the City’s harvest. Prior to issuing grower payments, HNH deducted standard processor expenses, referred to as “pool expenses” (shelling, sacking, fumigation, marketing, shipping, commissions, and related services) under the agreement. “Pool expenses” are based on actual expenditures and totaled $270,712.78, equating to approximately $0.44 per pound. Subsequently, predetermined industry assessments at $0.03 per pound ($18,294.96), and cleaning and dehydration fees at $0.19 per pound ($115,868.08) were deducted from payments to the City. Total deductions were $404,875.82. This resulted in a final net revenue of $1,085,396.18.
A key observation from the 2025 Crop Year is the actual cost of the pool-expense component. Expressed on a per-pound basis, the City’s pool expenses averaged $0.44 per pound, reflecting the true cost of processing and marketing the crop under prevailing operational conditions. Several factors contributed to this rate. First, while the quality and quantity of the City’s 2025 crop saw a significant improvement over past years, 2025 market dynamics created strong regional demand for drying, cleaning, and marketing capacity, which increased the overall cost of processor services. Second, industry-wide increases in handling and labor costs, including higher wages, elevated energy usage, equipment operation and maintenance demands, and the materials required for sorting, shelling, and packaging, directly raised per-pound processing costs. Third, the City’s edible-yield profile in 2025 averaged 58.6% (357,642 edible pounds from 609,832 delivered pounds), which while good, influenced the amount of processing effort required to achieve the highest anticipated revenue. Some volume was shelled to achieve a higher price, but also resulted in higher processing costs. All 609,832 pounds were fully dehydrated and processed, with zero pounds returned. Highlighting this per-pound impact is particularly important as the City evaluates processor agreements for future years, including the 2026 contract cycle, because it demonstrates how processor deductions can fluctuate significantly based on market and operational factors, directly affecting net farming revenue.
After processor deductions, the City received three separate payments for the 2025 crop:
• Payment #1, issued on February 28, 2026, totaled $304,916.00, representing the full $0.50-per-pound minimum payment on all delivered weight.
• Payment #2, issued on April 30, 2026, totaled $170,752.96, representing the second $0.50-per-pound minimum payment after subtracting dehydration, cleaning, and industry assessment fees.
• The Bonus Payment, issued on June 30, 2026, totaled $609,727.22 and was calculated based on the crop’s edible-yield performance and HNH’s annual point-based bonus formula. The bonus payment is a single payment and is separate from, and in addition to, the minimum payments.
Together, these three payments, Payment #1 + Payment #2 + the Bonus Payment, equal $1,085,396.18. For clarity, the City’s total receipts consisted explicitly of:
• Payment #1: $304,916.00
• Payment #2: $170,752.96
• Bonus Payment: $609,727.22
• Total Payments to City (2025 crop): $1,085,396.18
These payments collectively represent the net amount returned to the City after processor deductions, and the explicit breakdown strengthens transparency as the City evaluates fiscal implications for the upcoming 2026 processor agreement.
2025 Pecan Crop: Processor Costs, Payments, and Net Revenue
|
Category |
Amount |
Notes |
|
Delivered pounds |
609,832 lbs |
Basis for all processor charges |
|
HNH Reported Gross Income (approx. $2.44/lb) |
$ 1,490,272 |
Total crop value prior to processor fees |
|
|
|
|
|
Pool-Expense (approx. $0.44/lb) |
$ 270,712.78 |
Reflects cost of processing, marketing, and shipping under 2025 conditions (Shelling, sacking, fumigation, marketing, commissions) |
|
|
|
|
|
Assessments ($0.03/lb) |
$ 18,294.96 |
APC + APPB assessments |
|
|
|
|
|
Cleaning & Dehydrating ($0.19/lb) |
$ 115,868.08 |
Dehydration and cleaning charges |
|
|
|
|
|
Total Processor Deductions |
$ 404,875.82 |
Total retained by HNH for processing |
|
|
|
|
|
Payment #1 (2/28/2026) |
$304,916.00 |
First minimum payment |
|
Payment #2 (4/30/2026) |
$170,752.96 |
Second minimum payment, net of fees |
|
Bonus Payment (6/30/2026) |
$609,727.22 |
One bonus payment; no installments |
|
|
|
|
|
Net Revenue to City |
$1,085,396.18 |
City’s total receipts after processor deductions |
Proposed 2026 Payment Structure:
• Minimum Payment 1 (February 28): $0.60 per inshell pound
• Minimum Payment 2 (April 30): $0.60 per inshell pound
• Market Payment (June 30): bonus determined under Exhibit A and edible yield
Applicable fees and assessments include:
• Cleaning and dehydration fee: $0.19 per pound
• APC assessment: $0.01 per pound
o APC = American Pecan Council, a federal marketing order responsible for industry marketing, data collection, and compliance
• APPB assessment: $0.02 per pound
o APPB = American Pecan Promotion Board, a federal promotion program that funds national marketing and industry promotion activities
• Direct Costs for Processing and Marketing: Estimated to be $0.30 - $0.40 per pound
No additional annual maintenance or operating costs are anticipated beyond the scope of this agreement. A comprehensive financial and operational analysis, including A&K’s invoice trends, edible yield history, and reconciliation of pecan revenues and operating costs will be provided in the upcoming Westside Farming update.
Prior Council Action:
• March 3, 2025 - City Council awarded a contract to A&K Precision Management for Farm Management Services for 445 acres of pecan orchards.
• December 18, 2023 - City Council received an update on city-owned farmland and farming operations and provided direction to continue farming operations of the 445 acres of pecans.
• February 16, 2021 - City Council received an update on city-owned farmland and farming operations.
• November 16, 2020 - City Council authorized the City Manager to renew the City’s contract with HNH Nut Company to market the 2020 pecan crop.
• February 19, 2019 - City Council entered into a contract with Jeb Headrick Farming for an annual not-to-exceed amount of $1,000,000, under which HNH was paid directly by Headrick for processing and marketing services.
• December 17, 2018 - City Council authorized the City Manager to enter into contracts with HNH Nut Company DBA Hamilton Ranches and Naked Nut Growers for each entity to process and market half of the City’s 2018 pecan crop following changes in food safety regulations.
Alternatives:
1. Do not approve the agreement.
This alternative would leave the City without a processor for the 2026 pecan crop, causing operational delays, risk of spoilage, inability to market the crop, and disruption of the farm management workflow. Because processing is required for all harvested pecans, this alternative is not recommended.
Recommended Motion (and alternative motions if expected):
recommendation
I move to approve an agreement with HNH Nut Company for processing, cleaning, dehydrating, and marketing services for the City’s 2026 pecan crop, with payments made according to the processing agreement’s minimum-payment schedule, market bonus methodology, and applicable assessments and fees, and authorize the City Manager to execute the agreement and any related documents.
Environmental Assessment Status:
This action is not a project under CEQA and is therefore not subject to environmental review.
California Environmental Quality Act (CEQA) Review:
Approval of this processing agreement is exempt under CEQA Guidelines Section 15378(b)(5), as it involves administrative actions, procurement, and preparation of service contracts that do not commit the City to a physical project.
Deadline for Action: 10/19/2026
Attachments:
1. Processing Agreement - HNH Nut Company
2. Pecan Orchard Overview - 445 Acres
Strategic Goal: Indicates which City Strategic Goal(s) this item supports. Select all that apply.
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■  Economic Vitality |
□  Organizational Excellence |
■  Fiscal Strength |
■  Infrastructure & Growth |
□  Quality of Life |