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US walnut prices decline as buyers withdraw from market to consider options

August 11, 2022

New crop U.S. walnut prices dipped in the global market the week to Thursday amid slow demand and reports of a larger than expected Chinese harvest.

Buyers in destination markets are refraining from purchasing as they deliberate over price, quality, and shipping factors. As a result, inshell prices fell slightly on the week while kernel prices showed more substantial declines. Lower offers and continued availability of current crop material pressured new crop prices.

Stratamarkets assessed Chandler JL inshell at $0.83/lb FAS, down 3 cents on the week, and Chandler LHP 20 at $1.95/lb FAS, down 10 cents on the week.

US market

In the inshell market, sellers offered new crop Chandler JL inshell from $0.85-$0.99/lb FAS.

“We’re hearing all kinds of different numbers on Chandler inshell,” a packer in San Joaquin County said on Tuesday.  “It’s all over the board.”

A consignment of new crop October Chandler JL traded at $0.95/lb CIF India on Saturday, which nets back to $0.87/lb on a FAS basis. A packer reported selling at $0.83/lb FAS on Tuesday.

Sources said most U.S. handlers were continuing to offer above $0.85/lb FAS but might be prepared to leave some money on the table for early sales to stabilize prices.

A Turkey-based trader said the opening prices for U.S. origin Chandler JL inshell were only slightly higher than production costs, which he estimated at around 70-75 cents per lb. The trader said that while the end of August to September period is usually typified by a lack of product in the market, there appeared little prospect of such a scenario developing this year.

“[Turkish] buyers usually start buying with an emphasis on booking the earliest shipments possible from the U.S. but this year I don’t think they will feel the urge to do so and instead will focus on getting the best price possible instead,” the trader said.

Offers for U.S. kernel items trended slightly lower during the week. Buyers in Europe said the remaining loads of current crop lower half-count items were still available at discounted prices.

An unverified current crop trade for Chandler LHP 20 was heard at $1.80/lb FAS, while new crop for the same item was offered as low as $1.99/lb on a FOB plant basis.

The California Walnut Board’s July 2022 shipment report is due to be published this week. Packers said they expect the industry’s recent high rate of loadings to continue.

However, one packer said July shipments could be negatively impacted due to recent problems shipping containers from the Port of Oakland in California, which shut down for several days last month.

Chinese 2022 walnut crop

Reports from China suggest that the country is on course for a bumper 2022 harvest, potentially even larger than the 1.4 million mt (1.543 million short tons) estimate announced at the INC Nut and Dried Fruit Congress in May.

Most of China’s crop will be consumed domestically, with Rabobank estimating that Chinese 2021-22 walnut exports exceeded 200,000 mt inshell equivalent.

A Chinese packer said that until now, the Chinese harvest has progressed well with favorable temperature, humidity, and precipitation conditions.

“I think [Chinese] walnut output will be more than expected, more than 1.5 million metric tons,” the packer said on Thursday,  adding that the best time for harvesting this year will be around September 7.

With U.S. new crop inshell offers increasing, sources said it was too early for the majority of packers in China to offer their new crop. “We usually do not make offers until we hold stocks,” said a Hong Kong-based trading source.

The Chinese packer said his company would not offer its new crop until late August.

Turkey and Middle East demand

Activity in Turkey’s local market increased this week as traders picked up remaining stocks of current crop.

U.S. Chandler JL 2021 crop traded at $2.45/kg ($1.11/lb) EXW Mersin, and more material was offered at $2.55/kg EXW Mersin. Meanwhile, a container of rain-damaged Chilean Chandler 30+ traded at $2.35/kg EXW Mersin. Ex-works stocks of Xin 185 at Mersin are depleted, and containers are hard to find.

One reason for the demand for U.S. Chandler JL 2021 crop is its high percentage of the larger ‘Jumbo’ size. The JL size category is based on 70% Jumbo and 30% Large, but a Turkish trader said some 2021 loads had as much as 88% Jumbo.

Most inshell purchases in Turkey are cracked out rather than re-sold as inshell, so buyers within the country are weighing whether to buy Chinese or U.S. origin inshell based on yield rates and quality, rather than a strictly delivered cost comparison.

Chinese opening offers for Xin 185 inshell, an equivalent product to Chandler JL, were heard at $2.20/kg ($1/lb) FOB China. Ocean freight from Xinjiang to Mersin is estimated at $10,000 per dry container (47 cents per kg), while U.S. West Coast to Mersin freight is around 13 cents per lb (29 cents per kg).

A Turkish trader said that at current market prices and freight costs, kernel weight prices for both origins were broadly comparable, with higher yields for Xin 185 negating the lower U.S. FOB and freight rates. However, the trader said he and his customers prefer U.S. material for its lighter color.

“I’m not planning to buy Chinese walnuts this year, and none of my customers have been inquiring either,” the trader said.

Still, the Chinese packer said his inshell customers from Turkey and the U.A.E. informed him they were considering the competitive opening offers from the U.S. but were prepared to wait before committing to purchases.

The packer added that the Chinese Xin Er (or Xin 2) walnut was popular with buyers from the Middle East despite its lower yield compared with the popular Xin 185 variety. He said its popularity was due to its sweet, Chandler-like taste and lighter kernel color.

Turkish buyers of Chinese inshell can’t leverage cheaper rail freight costs this year. Last season, traders said rail freight from Xinjiang to Mersin cost around $9,000 per container (45 cents per kg), compared to ocean freight rates of $13,000-$15,000 (65-75 cents per kg) per container.

“But this year, the costs are much closer, and last year we suffered from late arrivals by train,” said a second Turkish trader. He said rail from China is not direct, and some rail bookings were delayed by slow trans-shipments.

Chilean market

Chilean walnut sales have slowed with packers reporting few inquiries from Europe as the region’s summer holiday season peaks.

The only reported inshell trade was for a consignment of Serr 36+ at $2.80/kg FOB, the lowest price for the item this season after early initial sales over $3/kg FOB at the start of the season.

Stratamarkets assessed Chandler 30-34 inshell at $2.43/kg FOB, down 6 cents on the week, and Chandler 34-36 at $2.98/kg FOB, down 6 cents. The Chandler 30-34 premium to the item’s nearest U.S equivalent, Chandler JL, was unchanged on the week at 27 cents/lb.

In the kernel market, a container of Extra Light/Light 80/20 for August traded at $5.80/kg FOB, and Extra Light/Light Large Pieces, also for August, traded at $4.30/kg FOB.

Packers in Chile said they hope kernel sales into Europe will increase when procurement managers return from their summer break.