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Chilean inshell market stabilizes as buyers focus on quality

June 9, 2022

Chilean inshell walnut prices in the global container market resisted downward pressure in the week to Thursday as buyers from Turkey and India snapped up product for prompt shipment at the higher end of recent trading ranges.

Stratamarkets assessed CH 30-34 at $2.65/kg FOB, down 3 cents on the week. CH 32-34 increased 4 cents to $2.83/kg FOB. The CH 30-34 premium to the item’s nearest U.S equivalent, CH JLIS, slipped 1 cent on the week to 22 cents/lb.

U.S. current crop sales remained slow amid reports that China began offering new crop, months earlier than last year.  

Chilean inshell market

CH 30-34 inshell traded in a wide range from $2.50-$2.70/kg FOB. A Turkish trader confirmed buying three loads on Tuesday at $2.70/kg FOB, a day after a Chilean packer sold five loads to India at $2.55/kg FOB.

The wide trade range has drawn attention. 

Chilean packers said inshell buyers want high-quality product and are willing to pay premiums for it. Some of those buyers intend to re-sell inshell and are seeking a clean external shell appearance. Other buyers who are processing walnuts in destination markets want high yields and lighter kernel color. 

The transaction at $2.70/kg FOB was for material with a minimum 50% yield and 95% extra light and light color.

One Chilean packer said he stopped offering CH 34 inshell after selling considerable volumes to Turkish and Indian buyers in recent weeks. 

“Because of the rain in April, we’ve been taking the quality of the walnuts into consideration,” the packer said. “A lot of the product that could have been sold as inshell may have to be cracked, so we’re studying our position.” 

A disparity in bid levels by region also explains the wide trading ranges for Chilean inshell. While buyers from India and the Middle East will pay a premium for a better shell appearance, European buyers often press for cheaper offers.

“There are lower offers into Europe because the lower-quality material usually goes there,” said the packer in Chile. “They sell inshell as inshell to consumers who don’t really care much about yield or color.”

Chilean kernels market

Chilean kernel sales have been slower than inshell. The packer in Chile said his estimation was about 35% of kernels are committed.

LHP 80 demand has been consistent throughout the season, with one load for July shipment trading at $7.75/kg FOB on Monday.

Demand in Europe for walnuts from Chile has been slow relative to previous years. Europe is the largest export market for walnut kernels and accounts for between 60-70% of demand.

A second Chilean packer who recently returned from a trip to the region said he noted “a lack of interest in buying walnuts.”

Sources said European supermarkets have delayed their purchases of Chilean 40% halves and pieces to exert pressure on packers in a weaker sold position to reduce their offer prices as the U.S. harvest approaches.

Last year, that strategy backfired for supermarkets in Europe. Availability in Chile tightened. During that period, the Chilean LHP 40 price rose from $6.50/kg FOB to $8.50/kg FOB, the first packer in Chile said.

On top of that, the supermarkets were unable to purchase from the U.S. in time for the peak Christmas season due to supply chain issues, resulting in reduced inventory.

Chinese new crop offers

Multiple companies said packers in China have started to submit offers for their new crop. Offers from northern hemisphere suppliers do not usually emerge until the end of the summer.

Chinese exports are increasingly competing with those from the U.S. as both countries’ crops harvest roughly at the same time. The harvest in Chile begins in March, so it’s less concerned with China.

A U.K.-based broker said he was skeptical that buyers would consider early offers from China. 

“The Chinese will always keep an eye open on what the U.S. does and the U.S. doesn’t generally come out with new crop offers until the end of the summer,” the trader said. “It’s still early, the fruits are on the tree, there’s nothing to be seen and buyers like to see what they’re going to buy.”

US market

U.S. sales are at a low ebb as the crop year draws to a close and 98% of the current crop and 86% of total supply is sold, according to Stratamarkets’ calculations based on California Walnut Board data.

The current focus is on how much the industry will manage to ship in the last four months of the season to reduce the carry-over.

“We are forecasting shipments over the last four months to be 15% higher than last year, which we believe is very attainable,” said food and agri-business Olam in a market report, also projecting a 2022 carry-out of around 125,000 short tons.

California shipped 154,355 inshell equivalent short tons in the May-August period last year. 

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