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US walnut prices edge down on sharper new crop offers

July 21, 2022

U.S. walnut prices in the global container market came under pressure in the week to Thursday as market participants  continued to post competitive new crop offers and trade activity increased for the new season.

Stratamarkets assessed Chandler JL inshell at $0.86/lb FAS, down 3 cents on the week, and Chandler LHP 20 at $2/lb FAS, down 10 cents on the week.

The move came as U.S. packers announced a subjective forecast that puts California’s 2022 walnut crop at 789,754 tons, up 8.2% on the year. The estimate shows the state tracking to produce its largest walnut crop on record.  

In other developments, concerns heightened that shipping walnuts from the Port of Oakland could slow after SSA Marine shut the port’s largest terminal.

US market

Many U.S. handlers said to move a sufficient quantity of new crop at the start of the year, they’ll need to price offers at aggressive levels to compete with a large Chinese new crop and a potential overhang of Chilean current crop in what is generally considered to be an oversupplied global market.

U.S. handlers looking to sell new crop are also competing with current crop supply, some of which remains unsold and unshipped.

Offers for new crop Chandler JL inshell were heard in the $0.81-$0.95/lb FAS range, although most packers are understood to be holding out for a price above $0.90/lb FAS. That would still be a considerable discount to last year’s opening prices.

There were unconfirmed reports of new crop Chandler JL sold at $0.85/lb FAS to a buyer in the Middle East.

Despite the relatively low opening offer range, some buyers are starting with buying ideas of around $0.80/lb FAS, according to market sources.

“Chinese hand cracking processors are showing interest and asking about brands, but we are not willing to sell if the price is below 90 cents,” said a U.S.-based trader. However, he added that he believes $0.85/lb FAS is a good first step to stabilizing the market. 

A packer in northern California said that with a worldwide surplus of walnuts in inventories, sellers will need to begin with attractive prices to entice demand.

“Last year we started at $1.40/lb [for Chandler JL),” the packer said. “That was just a bit too strong. We need inshell movement early on. If we don’t, it puts pressure on everything and everybody. I hope the idea of lower prices will get the market moving.”

A second U.S. handler said it is imperative that the U.S. ramp up inshell sales at a quicker pace than last year to build a solid sold position.

“Early inshell sales, which really get you to 50% to 60% sold by the end of December, are a big thing for the industry, but it didn’t happen last year,” he said.

In the kernel market, a packer reported selling a package deal of current and new crop Chandler LHP 20 at $2/lb FAS on Friday. New crop Chandler LHP 80 was heard offered by a trader at $2.70/lb FAS, a 5-cent premium to offers for current crop of the same item.

Clearing warehouses of current crop in time for the new harvest remains an issue for some U.S. handlers. A second U.S. trader said he had fielded several requests from sellers to move their remaining current crop loads.

“We’re getting all these guys with one-offs wanting us to move it,” the trader said.

Market sources said U.S. packers are acutely aware that they will likely be forced to compete with unsold Chilean volumes at the start of the new crop year, a situation that has happened before.

“We’re going to go into the year with Chile still needing to sell inventory,” the first packer said. “It’s going to be an interesting year. It becomes a ‘we will go lower [on price]’ type of game.”

U.S. packers announced their subjective estimate at a meeting on Tuesday. A third U.S. packer said he believed the 2022 crop would come in higher than the estimate at between 820,000 and 830,000 tons.

“But to be honest, whether it’s 820,000 or 790,000, it’s so many walnuts and the biggest crop ever,” he said.

The Chandler variety 2022 crop was estimated at an average 470,493 tons, with estimates ranging from 430,000 tons to 510,689 tons.

Another packer in northern California  said the overall 2022 estimate fell within the range of the industry’s prior expectations, which was between 780,000-820,000 tons.

Chilean market

Chilean walnut prices drifted during the week to Thursday as packers reported slow market activity, particularly for kernels, due to tepid buying interest amid a summer lull in the key demand centers of Europe and the Middle East.

In the inshell market, smaller size categories stabilized after some recent falls, while premiums for larger sizes closed in.

Stratamarkets assessed Chandler 30-34 inshell at $2.58/kg FOB, up 1 cent on the week, and Chandler 34-36 at $3.16/kg FOB, down 4 cents. The Chandler 30-34 premium to the item’s nearest U.S equivalent, Chandler JL, increased by 3 cents to 31 cents/lb, its highest since Stratamarkets started tracking the differential in April.

The U.S.’s aggressive new crop pricing for inshell has caught the attention of Chilean sellers, who usually manage to capture a hefty premium for their product due to higher quality. However, this year, buying decisions by inshell buyers in Turkey – usually Chile’s biggest inshell market – are dictated more by price due to the Turkish lira’s depreciation against the dollar.

“It will be hard to compete with Chandler JL at $0.85/lb FAS,” said a Chilean packer.

He said that his efforts to sell kernel items were frustrated by a lack of buying interest. As a result, he suspended processing and returned to the inshell market.

“I have been trying to move my last availability of walnuts as inshell,” the Chilean packer said. “We don’t want to continue cracking as the market for kernels is not moving at all.”

He added that his offer of $2.60/kg FOB for Chandler 30+ had not attracted many firm inquiries.

A U.K.-based trader said other Chilean packers were confronted with the opposite problem. Due to large remaining unsold stocks of lower-priced U.S. and Chinese inshell earlier in the season, they decided to crack out kernels straightaway.

“Now they are stuck not having sold enough inshell and also having cracked out too much material, and finding it difficult to sell due to the increase of kernels in the market,” the trader said. “It’s a Catch-22 situation.”

Demand

Several large retailers are reporting slow demand in their markets and holding off on large purchases as they attempt to get a better picture of future retail consumption levels. Inflation, rising food and energy costs and lower sales of processed items have been cited as reasons for lower consumption in both U.S. and international markets.

Retailers in Europe are also calculating which walnut origin would serve them best to fulfill their Christmas requirements, mindful of delayed shipment times.

“It’s really about shipping,” said a U.S. packer. “They are trying to figure out which country can get them the product on time and not miss sales,” he added, referring to the U.S. and Chile.

Other market sources believe Chile has the distinct logistics advantage, given that U.S. new crop won’t be shipped until September, although they have noted that there is still U.S. current crop available for prompt shipment.

Logistics

It was unclear how long the Oakland International Container Terminal, the largest terminal at the port, would remain shut following its closure on Tuesday. SSA Marine shut the terminal due to an insufficient number of workers at the terminal, said Marilyn Sandifur, a port spokeswoman.

The lack of workers at the terminal coincided with a protest by truck drivers of a state law that impacts contract workers. The protest began Monday and clogged traffic around the port and continued through Wednesday.

Truck activity at the remaining three terminals at the port was reduced, though ship operations continued at those terminals, Sandifur said. The port is the exit point for nearly all of California’s walnut exports.

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