Small size Chilean inshell price decline ends as buyers return

July 7, 2022

Chilean smaller-size category inshell walnut prices firmed in the global container market the week to Thursday, breaking six weeks of consecutive declines as the market showed signs of reigniting after restrained activity in June.

Stratamarkets assessed CH 30-34 at $2.63/kg FOB, up 13 cents on the week, and CH 34-36 at $3.20/kg FOB, down 3 cents. The CH 30-34 premium to the item’s nearest U.S equivalent, CH JLIS, gained 3 cents to 22 cents/lb.

US market

Momentum is building in the U.S. new crop market with sources anticipating more trade activity starting the first half of August. California packers are mindful of the competition that lower-priced Chinese offers present and may offer earlier than usual this year. 

A fresh offer for new crop Chandler JLIS for October-December delivery was posted at $1.10/lb FAS on Wednesday. In the previous week, new crop offers tested waters between $0.90/lb FAS and $1.05/lb FAS.

“It’s still early but I wouldn’t be surprised if a price of $0.95/lb FAS starts to get some traction,” said a U.S. packer, referring to Chandler JLIS.

In the kernel market, new crop offers for October-December Chandler LHP 20 and LHP 80 were submitted at $2.20/lb FAS and $3/lb FAS, respectively. A U.S.-based trader said U.S. new crop walnuts from the Linden area were sold to a trading company in the Middle East with no brand stipulated.  

Some packers are still trying to sell current crop to clear space for the new harvest. A European trader said he was offered a packer’s last seven loads of Chandler LHP 80 at $2.80/lb FAS but added he thought there was room to negotiate.

“I think packers just want to focus on new crop now, not worry about a few cents here and there,” the trader said. 

“It’s a flight to liquidity in the market right now,” a second U.S.-based trader said on Wednesday. “Anyone that has current crop wants to trade it in for cash and they have no power to price. We’re three or four months into recession.”

With the start of California’s walnut harvest approaching, another record crop in excess of 800,000 short tons is possible, sources said. A California packer in the northern region said field personnel were making their first survey estimates of the new crop this week.

“All the signs are so far it is going to be a decent crop,” the packer said. “We got through the first real heatwave of the season last week and according to initial reports, there don’t seem to be any impacts on the crop at this point.”

Long-running logistics problems at the Port of Oakland on the U.S. West Coast appear to be easing. Packers have pointed to an 18% year-on-year increase in walnuts shipping performance over the last two months as evidence of this.

Walnuts and other exports will continue to move from ports in California even though a labor contract representing about 20,000 U.S. West Coast dockworkers expired on Friday, according to a joint statement from the dockworkers’ union and the association representing their employers.

“While there will be no contract extension, cargo will keep moving, and normal operations will continue at the ports until an agreement can be reached between the Pacific Maritime Association and the International Longshore and Warehouse Union,” the statement said. 

Exporters and importers have been monitoring the negotiations, with some expressing concern that failure to reach a new agreement could slow shipments from the ports, intensifying already difficult supply chain challenges. Nearly all of California’s walnut exports leave from the Port of Oakland. 

Next week the California Walnut Board will publish its June shipment report. 

“From what I’ve heard, a lot of guys have cleared their backlog and got a lot of containers out,” said the packer referred to previously. “I would expect June to be a pretty big month.”  

If shipments for the remaining three months of the crop year remain 18% higher on year, then this year’s carry-out would be reduced to 121,803 ISE st, according to Stratamarkets’ calculations.

Chilean market

In the Chilean inshell market, prices for smaller-size categories improved with several loads trading at higher levels compared with recent weeks.

Chandler 30-34 traded three times at $2.67/lb FOB and once at $2.50/lb FOB with sources saying the price divergence could be partly explained by larger packers commanding brand premiums.

A Chilean packer said June was a relatively quiet month in terms of inshell sales, which prompted sellers to reduce their offers to attract buying interest.

“Now it seems like we’ll have another wave of demand, especially from India, because the first containers are arriving into that market and people are starting to re-sell them,” the packer said. 

He added that the easing off of sales was also connected to buyers’ need to resell received loads to generate cashflow before embarking on fresh purchases. 

The Chandler 30-34 price increase marked the first rebound in six weeks. Stratamarkets assessed it on Thursday at $2.59/kg FOB Chile.

Questions remain over whether Chilean kernel sales will increase after a slow start. Several packers reported no kernel sales despite offering over the last week, with one saying his sales had been limited to filling mixed loads with smaller volumes. 

“The market is very slow,” said a third packer in Chile. “It’s summer in Europe and generally in this period, sales are slow.” 

Turkish/European market

Buyers said demand projections for walnuts for the rest of the calendar year were weakening amid renewed strength in the U.S. dollar against currencies in destination markets such as the European Union, Turkey, and India.

“Out of Europe I can’t see much demand before the end of this year, perhaps for 2023,” said a Germany-based trader. 

“Buyers have to eat through the stocks first.” 

On Thursday, the euro neared parity to the dollar, falling to a record low against the greenback of below $1.02, which traders said would likely cause more demand destruction.

Added to this are the side effects of rising inflation, with expectations of decreases in consumer spending on tree nuts in general as energy and food prices spike.

“Local demand for walnuts is very low, I don’t think it is logical to be optimistic,” said a trader in Turkey, adding that at current shipment rates, total Chilean inshell volumes into Turkey “will hardly exceed 6,000 mt by the end of the season.”

Chilean crop year-to-date inshell shipments to Turkey were 4,111 mt at the end of May, down 56% on the year, according to Chilenut, the Chilean walnut industry association. 

Ample stocks in Mersin are also blunting demand. U.S. Chandler JLIS was available at between $2.45/kg-$2.75/kg CIF Mersin with local sellers trying to move recently arrived Chilean origin Serr 30+ inshell at $2.95/kg CIF Mersin, the trader in Turkey said.

With the five-day Eid al-Adha religious festival set to commence on July 9, trading sources were anticipating light market activity in the Middle East over the next week.

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