First signs of US new crop activity appear as walnut prices drift 

June 23, 2022

Walnut prices in the global container market drifted in the week to Thursday as Chilean packers continued to focus their inshell sales on India and the first signs of U.S. new crop activity surfaced.

Stratamarkets assessed CH 30-34 at $2.55/kg FOB, down 4 cents on the week, and CH 34-36 at $3.20/kg FOB, up 10 cents. The CH 30-34 premium to the item’s nearest U.S equivalent, CH JLIS, increased 2 cents on the week to 22 cents/lb.

US market

While most U.S. packers have sold their inshell for the season, some current crop kernel items are still available, although pricing varies depending on quality and timing.

Some European buyers were in the market for U.S. Chandler LHP 20, 40 and 80 in the hope of securing them at large discounts to Chilean product.

“I think smart buyers are trying to clean up what’s left in California before having to resort to buying more expensive Chilean product,” said one U.S. packer.

With U.S. packers and growers under pressure from rising levels of Chinese exports and increasing grower costs such as labor and water, there is speculation in the market that new crop activity could start earlier this year and in larger volumes.

“Guys are nervous about the state of the industry,” said a second U.S. packer. “I think you’re going to see a lot more pre-selling this year than years past.” 

The first reported U.S. new crop offer was heard this week, with Chandler JLIS for October-November offered at $1.05/lb CIF India.

A U.S. trader said U.S. new crop offers usually start around this time of year “for early birds for some inshell, but we are not seeing any buyer pushing for it.”

U.S. packers would most likely begin offering Chandler JLIS new crop at around $0.90-$0.95/lb FAS, the trader said.

In the kernel market, the first reported bid for U.S. Chandler LHP 20 new crop was posted at $2.20/lb FAS.

A third U.S. packer described the bid as “really aggressive and being on the threshold of a break-even price for the grower,” adding that in his opinion, grower-packers would be more willing to begin offering in the $2.30/lb-$2.40/lb FAS range for the item.

“There’s not much downside to $2.20,” he said.

Chilean market

Chilean packers are still working through their walnut sales, although market activity for the week was reduced by a national holiday in Chile on Tuesday.

CH 30-34 traded at $2.55/kg FOB on Friday, 4 cents down from Stratamarkets’ previous weekly assessment of the item, while CH 36+ traded in the $3.50-$3.70/kg FOB range.

A U.K.-based broker said that while Chilean packers were primarily targeting India for inshell sales, their sold positions could be boosted by seasonal demand from larger European inshell markets such as Italy and Spain.

“Take into consideration that whoever needs inshell for the Christmas season will most likely have to buy from Chile because they won’t be able to receive it in time from the U.S. unless things are getting better in terms of transit times,” he said. “But at the moment, many buyers are choosing to get some cover on some Chilean product.”

Sources said kernel sales may pose bigger problems for Chilean suppliers because their largest market, Europe, still has a surplus of supply.

The U.K. broker said low-priced kernels of U.S. origin were still shipping into the region to add to sizeable inventories already amassed in buyers’ warehouses.

A U.K.-based trader said the potential sale of Chilean origin Chandler LHP 20 at $6.05/kg CFR Valencia had been scuppered because the buyer procured less expensive U.S. origin material at Eur 5.40/kg on the local Spanish market. That converts to $5.68/kg ($2.45/lb) at Wednesday’s exchange rate.

Meanwhile, local consumption could be impacted by inflationary pressures in European countries, as rising food and energy costs hit consumers’ pockets.

“No one [in Europe] is in a rush to buy anything and the situation is sales are slow in local markets and no one knows exactly what they will need in terms of kernels,” the broker said.

Given Chile’s current sold position, packers there could still be selling kernel product in September, competing with U.S. new crop sellers. The U.S. new crop typically becomes available for shipment in September. 

Northern hemisphere crop update

Traders said that while it is still early in the northern hemisphere 2022 growing season to make accurate estimates on crop sizes, U.S. growers are reporting good nut sets.

The third U.S. packer said barring any negative weather-related events over the next three months, the first pointers were to “another record U.S. crop, maybe even 800 million-plus tons.”

China is also expected to produce a large crop this year, perhaps 20% more than last year, according to the U.K. broker. 

It will be accompanied by some aggressive season-opening prices, he added.

Earlier this year, some market participants said they had written off Ukrainian walnut supply for the 2022-2023 season due to the ongoing war in the country.

However, a supplier in the country said Ukrainian sellers would truck their products to Bulgaria so they could be ocean-shipped to export markets.

“I think the Ukrainian crop will be smaller than usual,” he said, attributing the likely reduction to Russia’s encroachment into around 20% of the country.

He added that it was difficult to derive an accurate picture of the Ukrainian crop size due to the lack of official data in the country.

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