When I use the render{rmarkdown} to produce pdf file from .Rmd file on my Mac, an error message says
pandoc: pdflatex not found. pdflatex is needed for pdf output.
This answer on TexExchange might help.
I found I was having issues with pdflatex "missing" after I upgraded to OS X Mavericks (e.g. when checking package builds in RStudio I was getting an error tools::texi2pdf pdflatex missing message).
Check that /usr/texbin exists.
In terminal:
cd /usr/texbin
If "No such file or directory" then you will need to create a symbolic link to your installation's texbin. Mine was in /Library/TeX/Distributions/.DefaultTeX/Contents/Programs/texbin
In terminal:
ln -s /Library/TeX/Distributions/.DefaultTeX/Contents/Programs/texbin /usr/texbin
In terminal, check the result of echo $PATH. Make sure that /usr/texbin is present. If it isn't present, then you need to add /usr/texbin to your PATH variable.
If you find yourself having to mess with the PATH variable, installing the latest version of MacTex might be a better solution.
UPDATE: OS X 10.11 El Capitan no longer allows writes to /usr so the latest version of MacTeX (2015) now writes a link to /Library/TeX/texbin instead of /usr/texbin on this system.