Global walnut prices leveled in the week to Thursday as details emerged of the first reported new crop offers for Chinese inshell, raising the prospect of increasing competition between U.S. and Chinese suppliers as the northern hemisphere harvest kicks off.
Stratamarkets assessed Chandler JL inshell at $0.86/lb FAS, unchanged on the week, and Chandler LHP 20 at $1.93/lb FAS, down 7 cents on the week.
China new crop inshell offers
With the northern hemisphere harvest fast approaching, Chinese suppliers have tabled their first offers for new crop inshell. It’s unusual that China is offering this early in the year, market sources said.
Xin 185 30+ inshell was offered to Turkish buyers at $2.20/kg ($1/lb) FOB China, with higher offers up to $2.32/kg ($1.05/lb) FOB also reported. Last week the first U.S. new crop Chandler JL inshell offers were tabled at around $0.85-$0.95/lb FAS, with deals executed as low as $0.81/lb FAS.
Sources said the move was a sure indication that Chinese growers had taken note of the competitive first inshell offers from California and were gearing up to compete on price in a market where the near-term demand picture is uncertain.
A U.S.-based trader said local hand-cracking processors in China had received new crop offers for Xin 185 in a $1.05-$1.40/lb range depending on size, quality, and delivery terms.
“Chinese buyers say it is too early to gamble on new crop because they know U.S. Chandler is offered at $0.85-$0.90/lb FAS so they won’t pay $1.20-$1.40/lb for Xin 185 no matter what size,” the trader said.
A Turkey-based trader said he was surprised at the low levels of the Chinese offers given that he had never seen Chinese suppliers offer below $2.40/kg ($1.09/lb) FOB for inshell.
Sources said that at the current reported offer levels, importers from Turkey and the U.A.E. would probably prefer U.S. over Chinese new crop inshell but purchasing decisions could be swayed by changes in freight costs.
The Turkey-based trader said China-Mersin ocean freight currently costs $10,000-$11,000 (50-55 cents/kg) per 40-foot dry container, adding that Turkish importers using seaborne vessels would “find it hard” to re-sell Chinese inshell because of the high cost of transportation.
The U.S.-based trader said that depending on capacity, Chinese exporters could ship inshell walnuts by rail from Xinjiang to Turkey at a cheaper rate.
“Many [exporters] are able to get government support for exporting by rail, and some might get customs duty support,” the trader said.
Ocean freight from China to Jebel Ali in the U.A.E. is currently priced at around $4,700-$5,000 per 40-foot dry container (10-11 cents/lb), while there is a wide variance in pricing for dry containers from Oakland to Jebel Ali at $2,700-$7,000 (6-16 cents/lb) per dry container depending on the shipping line.
“If Chinese opening offers are $2.20/kg or even lower at $2/kg, and they can reduce their ocean freight rates, then I believe it’s possible that importers can change direction to Chinese origin,” said the Turkey-based trader.
As U.S. packers continue to prepare for the new season, more new crop offers for inshell and kernel items have emerged, broadly in line with those heard over the last two weeks.
Ten loads of new crop Chandler JL traded at $0.86/lb FAS on Friday, with offers for the item between $0.83-$0.90/lb FAS. Buyers believe they can chip a few cents off the offers at the higher end of that range.
New crop inshell offers for other varieties that ship before Chandler were also submitted. Howard JL for September-October shipment is offered in the $0.70-$0.85/lb FAS range, while Hartley JL, which ships later, was offered at $0.90/lb FAS.
U.S. packers generally believe California inshell is priced at the right level to take business from China, in contrast to last year, when opening offers of around $1.40/lb FAS for Chandler JL were declined in favor of lower-priced Chinese varieties.
In the kernel market, new crop Chandler LHP 20 was offered as low as $2.13/lb FAS for October-November shipment, while new crop Chandler LHP 80 is available at $2.75-$2.80/lb FAS. Sources said that with few transactions executed, pricing varied.
“The price seems to be everywhere this year,” a market source said. “ With the bigger Chandler crop, some of the packers are willing to discount and build some sold position first, while others have still not moved yet.”
Chilean walnut prices were mixed during the week to Thursday as packers on the whole reported quiet market activity, punctuated by a few transactions.
In the inshell market, prices of smaller size categories were stable, while premiums for larger sizes continued to close in.
Stratamarkets assessed Chandler 30-34 inshell at $2.59/kg FOB, up 1 cent on the week, and Chandler 34-36 at $3.18/kg FOB, up 2 cents. The Chandler 30-34 premium to the item’s nearest U.S equivalent, Chandler JL, was stable at 31 cents/lb.
Although sales have been slow recently, Chilean packers remain upbeat that they can continue to ship to different destination markets as a counter-seasonal supplier, given that northern hemisphere crops are unlikely to serve European Christmas demand due to logistics delays.
In a market update released July 21, Chilean packer Calbu said August and September should be active months in deliveries before the northern hemisphere harvest and with enough time for the Christmas sales.
“Last week’s sales started moving again and so far, Chile is 62.8% sold,” the report said.
Chilean packers are mainly focused on sales to India, given that Turkish demand has dried up despite reasonably strong shipments in June.
The Turkey-based trader said Chilean packers would struggle to sell their remaining inshell to Turkish buyers unless they reduced Chandler 30-34 prices to $2.20/kg FOB. Chilean Chandler 30-34 has so far this season not ducked below $2.50/kg FOB, according to Stratamarkets assessments.
“If [Chile] can keep their product in good shape before their next crop, which is possible as there is cold weather in Chile so they don’t have the extra cost of cold storage, they could still sell out,” the trader said.
All major destinations appear overstocked, market participants said. Turkish inshell demand remains weak, with market sources reporting that local importers and traders are struggling to attract any firm bids for their offers.
“Walnut dealers in Turkey are not happy,” said a second Turkish trader. “The Turkish lira is not competitive, there is talk in the market of another huge Chinese crop that could be more than 1.4 million tons.”
He added traders are weighing whether to focus their business on buying and selling the domestic crop given the increasing costs of importing walnuts.
Considerable stocks of U.S. origin current crop remain at bonded warehouses in Mersin. Loads of U.S. origin Chandler JL are available in the $2.53-$2.55/kg ($1.15-$1.16/lb) ex-works range.
Walnut stocks in Dubai are high and importers are focusing on selling off their long positions to generate cashflow amid worryingly low consumption rates.
A U.K.-based trader said his U.A.E.-based clients were regularly in touch for price updates but were not purchasing “because they believe it is a buyer’s market.”
In the Northeast Asian kernel market, Japanese and Korean buyers are struggling with the high U.S. dollar against their local currencies and still working their way through their current crop inventories.
One source said that if opening offers for new crop Chandler LHP 20 J-spec shipments remain around $2.20/lb FAS, then the price would more or less tally with current ex-works prices when adjusted for freight, which could assist importers in moving their stock on the local market.
However, he warned that if transactions for the item fall below $2.20/lb FAS, news of cheaper-priced new crop could hinder clearing their stocks.
In Europe, traders said buyers’ warehouses were well-stocked amid slow consumption and minimal activity.
“We see that 2021 crop inshell walnuts are piling up in Europe,” said a trader based in Germany. “It’s a very good question how this mess will be solved.”
He said the recent wave of extremely hot weather in the region had done little to boost consumption as retail sales drag amid high inflation. “Even ice cream seems to sell slower, and customers are asking to delay ingredient deliveries,” he said.
It will likely take weeks to clear the backlog of containers that need to be shipped from the Port of Oakland following a weeklong shutdown, said Robert Bernardo, director of communications at the port.
Terminals re-opened on Saturday and the shutdown is expected to negatively impact July walnut shipments. The California Walnut Board is scheduled to release July shipment numbers by August 12 in its July 2022 position report, the penultimate report for the 2021-2022 crop year.