Walnut market cools on Chilean sales slowdown and lower US offers

June 16, 2022

Walnut prices in the global container market dipped in the week to Thursday as sales from Chile slowed and offers fell for U.S. export-grade kernels.

Stratamarkets assessed CH 30-34 at $2.59/kg FOB, down 6 cents on the week, and CH 32-34 at $2.73/kg FOB, down 10 cents. The CH 30-34 premium to the item’s nearest U.S equivalent, CH JLIS, fell 3 cents on the week to 19 cents/lb.

U.S. CH LHP 20 was assessed at $1.99/lb FAS, the first time  the item has fallen below $2/lb FAS since Stratamarkets began tracking prices in January. After the assessment period closed, a packer reported selling CH LHP 20 at $2.30/lb FAS on Friday.

Chilean market

After a brisk start to the 2022 season, Chilean selling activity has eased in recent weeks as buyers take delivery of delayed shipments and assess quality.

A Turkish trader said buyers in the country were considering if recently purchased Chilean inshell material could be sold in the local market at a margin or whether premiums could more easily be secured by re-exporting to markets in the Middle East.

CH 30-34 traded at $2.70/kg FOB and $2.71/kg FOB but was also offered at $2.60/kg FOB, reflecting the wide variance in pricing for the item, with some buyers prepared to pay premiums for better yield and color specifications.

Prices for CH 32-34 fell as the item traded at $2.70/kg FOB and $2.75/kg FOB on Tuesday, 10 cents below the previous week’s traded levels. Although packers are confident that another wave of buying will emerge over the summer, there is concern among some Chilean packers that kernel sales have been light.

Some packers reported low demand for kernel items. A handler said he was in prolonged negotiations to sell LHP 80 at $7.50/kg FOB and Large Pieces at $5.60/kg FOB but was unable to close the sales.

“Demand for kernels has been slower than usual this year,” said another Chilean packer, adding that he was unsure if he would complete his kernel sales before the start of the approaching harvests in California and China. 

US market

California has improved its sold position over the last few weeks. There is little to no export-grade inshell available, packers said. 

However, prices for export-quality kernel items fell as packers sought to cash out on their few remaining available items. U.S. NCH LHP 20 traded at $1.85/lb FOB on Tuesday, down 11 cents from Stratamarkets’ FAS assessment from the previous week, when adjusting for freight.

A European trading source said there were still a few packers with shipments of U.S. CH LHP 20 to be sold, with one shipping to Europe on consignment. The item was heard offered at $2/lb FAS on Monday.

The majority of offers in the market are for domestic-grade Combo product as packers continue to clear out their warehouses in preparation for the new harvest.

“We are coming into the summer months, between now and August, it’s just a flight to liquidity,” said a U.S. broker. “Guys are trying to get cashed out.”

U.S. year-to-date domestic shipments continue to lag for the 2021-22 crop year, particularly in the kernel market, which is down 9% at 146.8 million lbs, according to the California Walnut Board’s latest shipping report.

“The domestic market has been very disappointing,” said a packer, adding many major domestic buyers bought heavily earlier in the crop year at higher prices when estimates reported a potentially lower crop than expected.

The packer said many retailers are still working through that inventory, keeping consumer-level prices high. Those high consumer prices curb demand as the U.S. market contends with rising inflation.

In a market report, one U.S. trader said contributing factors to the lower domestic shipments included higher opening prices, economic slowdown and less volume to date being sold through the USDA.

“With lower pricing moving through to the retail level we hope to see more robust shipments going forward,” said the report.

Anecdotal reports are that a USDA purchase program will clear $30 million worth of inventory –understood mainly to be lower grade Combo and Domestic material — between September and December.

Packers noted the timing is not ideal given that they would have to secure cold storage to get the inventory through the summer, incurring a significant storage cost to protect a generally lower quality inventory. 

China and US harvest

With China establishing itself as a force in the global export market, the coming northern hemisphere harvest will be a watershed moment given that the country is expected to produce another record crop.

U.S. packers said they believe they may have to be more aggressive in their opening offers in the export market than they were last year when they were undercut by lower-priced Chinese items.

“California completely underestimated China,” said a Fresno County-based packer. “It isn’t coming, it’s here.” 

He added that reports of lower-quality Chinese nuts may be more reflective of the country’s limited cold-storage capacity rather than an indication of an inferior product. 

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