U.S. origin inshell and kernel prices firmed in the global walnut market the week ending Thursday as trade activity increased.
The move followed two consecutive weeks of price declines for Chandler Jumbo Large inshell and Chandler LHP 20, two of the more actively traded items. U.S. sellers expressed optimism that prices had found a floor.
“Hopefully we can continue to see improvement from here so the growers can make a little bit of money,” said a California packer.
Market participants reported transactions for multiple U.S. origin inshell and kernel items during the August 18 to August 25 assessment period, evidence that buyers are increasingly willing to shift from inquiring to transacting.
More demand was seen on the cusp of committing but still waiting on the sidelines for prices to stabilize and for fresh crop estimates from California and China.
“On the inshell and kernel, I see a lot of demand, but I don’t see the action happening yet,” said a U.K.-based trader on Tuesday. “They’re checking price but they’re not ready to make the commitments. That’s not just from one buyer, that’s from five or six buyers. They’re saying I want to cover, but I see prices doing down, so why should I cover now?”
A trader based in Turkey reiterated that view.
“I haven’t closed any new crop deals yet,” the trader said on Monday, adding that he had an offer from California for 10 containers of Chandler Jumbo Large inshell at 87 cents/lb FAS for October/November shipment. “We are still waiting for the estimates from California and China.”
The USDA’s National Agricultural Statistics Service (NASS) is scheduled to release its 2022 California Walnut Objective Measurement Report on September 1. Packers in China are expected to release a forecast of their new crop size at a conference in Wuhan next week.
Last month, California packers announced a subjective forecast putting the state’s upcoming walnut crop at 790,000 tons. This year’s crop in California reached 730,000 tons, exceeding NASS’ previous objective measurement forecast by 9%.
With the objective forecast approaching, some California sellers expressed a need for more early commitments to build momentum: “No one is liking these prices,” a second California packer said on Thursday. “But if there’s an opportunity to move stuff early, don’t miss it.”
Several sellers said prices could show moderate gains if the forecast surprises to the downside but expressed doubt that a surprise to the upside would substantially weaken prices given current levels.
“I don’t think the market can drop from here,” said a third California packer on Wednesday. “There’s no point in growers harvesting a crop if prices get any lower.”
Early estimates put China’s new crop at about 1.5 million tons, most of which will be consumed domestically.
The trader based in Turkey said the Xin 185 meat yield from China’s new crop is estimated at 64-65%, up about 5% from last year, with a 90% light quality, according to his suppliers in China. The trader said the higher meat yields decrease both the cracking costs and the duties paid by importers in Turkey due to tax regulations in the country.
“When you have more meat yield, it means the duty paid per ton is less than U.S. Chandler,” the trader said. “If the walnut quality will be the same as the information my suppliers in China are giving, I believe Turkey will put interest in the Chinese walnuts,” the trader said.
But some market participants expressed skepticism about reading too much into reports of meat yields and quality this early from China, noting that it wasn’t clear if harvest has begun there. A packer in Chile who sells to China said he believes harvest has begun for some varieties, but not for the Xin 185.
Chandler Jumbo Large inshell traded six times during the assessment period from 75 cents/lb FAS to 87 cents/lb FAS. Stratamarkets assessed the item at 83 cents/lb FAS based on the average of the trades. Buying interest was left at the same level at the close of the period, with a trade reported following the close at 87 cents/lb FAS.
Trade activity on larger Chandler inshell items increased. Chandler Jumbo inshell traded twice at 89 cents/lb FAS and Chandler Super Jumbo inshell traded at 93 cents/lb FAS.
Stratamarkets assessed the Chandler Jumbo inshell at 89 cents based on the trades, which widened the Chandler Jumbo price premium to Chandler Jumbo Large inshell from 3 cents to 6 cents.
Howard Jumbo Large inshell traded at 67 cents/lb FAS and was assessed at the same level. The Chandler Jumbo Large premium to Howard Jumbo Large widened from 9 cents to 16 cents as prices for the items moved in opposite directions.
Despite the uptick in inshell trade activity, participants said activity remained slow for this time of year.
“Normally, California shippers really rely on the early inshell markets, and we’re just not seeing them,” said the first California packer referred to earlier. “We’ll probably see inshell sales come in after the New Year, which is the opposite from what we normally see.”
The second California packer said many new crop inshell sales this year have been with regions such as North Africa that are outside California’s traditional inshell markets.
Chandler LHP 20 trade activity also increased with six trades verified. Five of the six trades reported were for the higher-quality Japan specification, which traded from $2.05/lb FAS to $2.15/lb FAS. The regular specification Chandler LHP 20 traded at $2.00.
Stratamarkets assessed Chandler LHP 20 at $2.02/lb FAS after normalizing the Japan specification trades to the assessed specification by subtracting 8 cents.
Trade on other kernel items remained thin. Chandler LHP 80 traded at $2.50/lb FAS with an unverified trade reported at
$2.58/lb FAS and a closing offer at $2.60/lb FAS. No verified trades were reported for the Non-Chandler LHP 20.
The historically low kernel prices mean kernel items are exposed to minimal downside price risk, a fourth California packer said on Wednesday.
“There are some packers that just sell inshell and they have to sell no matter what,” the packer said. “The kernel guys can be a little more selective and we already have the cheapest kernel prices that I’ve ever seen. The second it turns a penny or two and starts going up, you’ll see a lot of buyers jump in.”
Chile inshell and kernel
Chile-origin inshell prices mostly fell as packers worked to find sellers for uncommitted supply.
Chandler 32-34 and Chandler 36+ showed the sharpest losses, each falling 10 cents on the week, while Chandler 34-36 lost 5 cents. The exception was Chandler 30-34, which gained 6 cents on the week.
Declining prices for Chilean walnuts in recent weeks have sparked new demand from Turkey, India, and China. “Even though China has a big crop, they are buying from Chile,” a packer in Chile said.
In addition to falling prices, a decline in freight rates could also be fueling overseas demand for product from Chile. This year, most packers in Chile shifted from selling on a CIF to FOB basis.
There is a shortage of quarter-size kernel in Chile’s unsold inventory, the packer said. He added that Chile is about 75% sold and is unlikely to finish selling anytime soon.
“This year, I think we will be selling until January,” he said. “And we’ll probably have a carry-over.”