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There seems to be two types of catepillars that create these web nests: tent catepillars and webworms. The difference seems to be that webworms make their nests at the edges of the branches and encapsulate the leaves thus protecting them while they feed. From everything I've read, these are huge pests and can completely defoliate a tree leaving web nests all over it. Eventually, they turn into big mothes with a wingspan of about 2 inches. Gross little things, arn't they?
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