Chilean inshell sales continue at premiums as US prices stabilize

April 21, 2022

Walnut prices drifted the week ending Thursday in the global container market amid light activity after the Easter holiday weekend, with few offers for U.S. Chandler inshell and higher half-count kernel items amid tightening availability of both.

Stratamarkets assessed U.S. Chandler JL inshell at $0.92/lb FAS, up 2 cents on the week, and U.S. Chandler LHP 20 at $2.15/lb FAS, unchanged on the week.

U.S. prices have stabilized in recent weeks after being under pressure since the start of the year as packers sought to deplete their large inventories amid lower demand from Europe and the Middle East and competition from Chinese exports.

Inshell market

Turkish inshell demand had previously been constrained by what local traders described as considerable stocks of Chinese and U.S. old stock available on an ex-works basis in bonded warehouses at the port of Mersin. These stocks have since been whittled down by increased buying ahead of Ramadan, which started earlier this month. 

One U.S. packer said a large quantity of Chinese inshell had replaced U.S. product in Turkey, but with year-to-date U.S. inshell exports down 44%, “you would still think that those stocks would be somewhat depleted by now.”

A trading source in Turkey said on Wednesday that walnut importers in the country had endured a “difficult time” since the U.S. harvest in September, citing a significant decline in the Turkish lira against the U.S. dollar and logistical bottlenecks in the container freight market.

He said some Turkish buyers had to sell Chinese and U.S. stocks at discounts to origin or purchase price, and current inventory levels meant they were looking at Chilean new crop to fill gaps.

Chilean new crop Chandler 30-34 inshell products are currently trading in the $2.60-$2.70/kg ($1.18-$1.22/lb) FOB range, at a substantial premium to equivalent U.S. Jumbo Large, which traded at $0.92/lb FAS on Wednesday.

“Surprisingly to me, I can tell you that Turkish buyers are very active in Chile and now accepting the higher current prices,” one Chilean packer said.

The trader in Turkey said he believes Chilean suppliers may have pushed the price up too early and that Turkish buyers could turn their attention back to China, considering that Xinjiang 185 inshell was currently offered at $2.65/kg ($1.20) FOB.

Chinese freight into Turkey commands a significant advantage over Chile, particularly as shipments can be transported from Xinjiang in Northwest China to Turkey via rail.

“[Turkish buyers] will need to have light material product,” the Turkey-based trader said. “The color matters but when the price difference is wide, choices tend to change.” 

Turkish demand for Chilean inshell is also increasing because buyers are mindful of Chile’s significant customs duty advantage of around 16 cents/lb over the U.S., which is reducing the impact of the premiums.

“It looks like Chile seems to be getting the prices they have been requesting since the beginning of the harvest,” said a Germany-based trader.

According to market sources, offers from Chile have gravitated increasingly towards FAS or FOB basis instead of CIF, mainly due to the shipping logistics issues, which have resulted in delayed and rolled shipments. 

The trader in Turkey said this change could cause problems for smaller Turkish importers who are not used to booking freight for their purchases.

“But volume importers have to be okay with it,” the trader said. 

Kernel market

A U.K.-based trader noted that higher half-count Chandler kernel items such as LHP 80 were in short supply and would likely “run out before the start of the new harvest.”

With Chandler LHP 80 assessed this week at $2.95/lb FAS, its premium to LHP 20 stood at 80 cents on Thursday, up from  65 cents in mid-January.

Large kernel buyers are reportedly struggling to find the required volumes of light product from California and will have to pay a premium if they decide to replace it with Chilean new crop. Business closed last week for Chilean Chandler LHP 80 at $7.50-7.55/kg ($3.40-3.42/lb) FOB Chile, while the item was last offered at $7.70/kg ($3.49/lb) FOB Chile.

U.S. shipments

The California Walnut Board’s latest position report published on April 11 showed the state’s March shipments at 75,242 inshell equivalent short tons (ISE), down 1.2% month year-on-year. Crop year-to-date shipments were 449,180 ISE, down 15.8% from the previous September to March period.

One U.S. packer said he was optimistic that shipments had improved considerably over the last week and were “looking good” through the end of the month.

“I would expect April to be a very positive shipping month for the industry,” he said.

California looks set to record another record carry-out this year, with the latest estimates indicating that over 150,000 ISE could be carried over in September, up from 98,054 ISE in 2021.

A second U.K.-based trader said that although he accepted the carry-out would be “huge,” rain damage to U.S. crops that occurred last October meant that a large proportion of it would be lower-grade amber and light amber Combo product, which is typically sold into the U.S. domestic market.

Crop year-to-date shipments stand at 449,180 ISE or 55% of total supply. However, with future purchase commitments at over 205,000 ISE, sources said the ending size of the carry-out depends on how much of that committed stock could be shipped. 

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