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U.S. origin prices fall as Chile improves its sold position

August 18, 2022

Prices in the global walnut market slipped to fresh lows in the week to Thursday as U.S. sellers accepted lower bids for their new crop inshell to kickstart sales for the new season amid expectations of a large crop and unsteady demand.

In the kernel market, Chilean packers sold significant volumes of kernels to Europe at the bottom end of their recent price range, improving the country’s sold position, multiple sources said.

Stratamarkets assessed Chandler JL inshell at $0.81/lb FAS U.S., down 2 cents on the week and its lowest since Stratamarkets started tracking prices in January. Chandler LHP 20 was assessed at $1.90/lb FAS U.S., down 5 cents on the week, also a new low.

Inshell market

In the U.S. inshell market, new crop Chandler JL offers fell to the $0.80-$0.85/lb FAS U.S. range, and several trades were reported between $0.80/lb FAS U.S. and $0.84/lb FAS U.S. New crop inshell trade remained thin during the week.

“We’ve been offering but mostly what we’re seeing is people kicking tires,” a California packer said. “We’re not ready to ship and they’re not ready to pull. There’s not a lot getting done.”

Packers are mindful that this year could herald California’s largest ever crop on record, while reports from main northern hemisphere competitor China suggest a similar scenario for its approaching harvest.

Market sources said with U.S. packers having priced their products at a potential discount to competing Chinese product, they are reluctant to go below the $0.80/lb FAS U.S. threshold, considering that current prices hover slightly above production costs.

Bids for Chandler JL are being tabled at $0.75/lb FAS. One U.S.-based trader said that despite the relatively competitive opening prices on offer compared to previous seasons, buyers were reluctant to purchase due to concerns of activating further price falls.

“Buyers don’t want it to drop a week after they buy more than anything,” the trader said. “They really just want to see the market stabilize to give them the confidence to purchase.”

Inshell prices from counter-seasonal producer Chile also softened this week, with some sources saying the aggressive pricing from California was applying downward price pressure on Chilean-origin product. However, one U.S. packer said the reverse may be true in that reduced offers for unsold Chilean inshell amid lighter demand from India and Turkey could be weakening U.S. inshell prices.

Trades for Chilean Chandler 30-34, a near equivalent item to Chandler JL, were reported at $2.40/lb FOB Chile and $2.55/lb FOB Chile and it was offered at $2.28/lb FOB Chile on Wednesday, with one packer insisting variance in quality explained the wide range of pricing.

Stratamarkets assessed Chandler 30-34 inshell at $2.34/kg FOB Chile, down 9 cents on the week. The Chandler 30-34 premium to the item’s nearest U.S equivalent, Chandler JL, narrowed 2 cents on the week to 25 cents/lb, a six-week low.

Inshell demand

Sources at major destination markets for inshell cited various reasons why early season buying demand had faltered.

Indian importers are holding back from taking positions as they seek to ensure quality, said an India-based trader, adding that another deterrent was the rumor that volumes of walnuts were being smuggled into the country to avoid customs duty.

Sources in Turkey said that usually this time of year importers start their new supply contracts and are therefore keen to book the earliest shipment slots. However, this year the situation has changed due to tepid demand hampered by the Turkish lira’s sharp fall against the U.S. dollar and slow drawdown of stocks. Current crop U.S. origin Chandler JL is still available to buy on an ex-works Mersin basis at discounts to current new crop offers.

“In Turkey, the warehouses are still full, and no one needs to buy immediately,” said a Turkey-based trader.

The trader added that he had been given a spot indication of $2.35/kg ($1.07/lb) FOB China for new crop Chinese origin Xin 185 30+ inshell, so the U.S. Chandler JL $0.80/lb FAS U.S. price could be attractive to Chinese buyers, despite the 25% customs duty.

“Unless China improves its price, I believe some [Chinese] buyers will try U.S. Chandler,” he said.

However, a trader in Hong Kong expressed skepticism that this trade flow would emerge, citing the high import duty and the wealth of domestic purchase options within China.

Kernel market

U.S. new crop kernel item prices softened during the week. Chandler LHP 80 new crop offers ranged from $2.70-$2.85/lb FAS U.S. The California packer referred to earlier said he was offering at the higher end of the range because in previous low-price years, high half-count items tended to sell out quickly.

“When I see higher prices is when I’ll get more aggressive on the Chandler LHP 80,” the packer said.

Multiple market sources said that around 3,000 metric tons (6.6 million lbs) of Chilean 40% light halves material for August-September shipment has been sold to a large German retailer over the last few weeks, at prices in the $5.35-$5.45/kg ($2.43-$2.47/lb) FOB Chile range.

While the prices quoted are at the bottom end of recent price ranges for the item, a Chilean packer conceded that Chilean kernel prices had fallen recently, adding that the business with Europe included some light amber material, which would have discounted the overall price.

The U.S.-based trader referred to earlier said the news was mixed fortunes for U.S. sellers as it means some buyers will be covered but also means California may not have to compete as much with Chile looking ahead.

Chilean packers have estimated that Chile’s overall sold position – both kernel and inshell – has risen to about 75% as a result of the trade. Slow Chilean kernel sales this year had increased speculation that Californian handlers would have to compete with surplus unsold Chilean product.

Germany is a major destination for U.S. kernels, and crop year-to-date shipments stand at 74,240,499 lbs, up 32% on the year. Packers said the large recent purchase from Chile meant U.S. packers were unlikely to meet any firm German demand in the fourth quarter.

Chinese new crop and exports update

While early estimates for China’s 2022 crop are around 1.4 million mt, up 27% on the previous year, sources in China said an objective estimate would be released after a tree nut conference in Wuhan later this month.

Market sources said they expect competitive pricing for new crop, but most offers are unlikely to emerge before the Mid-Autumn Festival on September 10.

According to one Chinese supplier, China achieved record export shipments of 193,481 ISE mt of walnuts from September 2021 to June 2022, up 15% on the corresponding year-earlier period.

While sellers in the country believe export growth will continue, one major concern for the industry is logistics: China has been prone to container freight delays and logjams as sections of the country regularly swing in and out of lockdowns brought on by its zero-Covid policy.