The walnut market reacted with surprise to a lower-than-expected USDA crop estimate at the tail end of last week, spurring a short-lived uptick in inshell prices as buyers largely declined to chase higher offers.
California’s walnut production for the upcoming crop year is forecast at 720,000 short tons, down 1% from 2021 output, according to the 2022 California Walnut Objective Measurement Report, released on Thursday by the USDA’s National Agricultural Statistics Service (NASS).
The estimate came in considerably lower than market expectations and initially triggered firmer bids. But as U.S. handlers raised offers by a few cents in response, buyers on the whole chose not to pursue the higher asking prices.
“We saw everybody try to push [inshell prices] up immediately after the number came up but it basically gained no traction, and every day that goes by I’m hearing numbers closer and closer to pre-estimate levels,” said a U.S.-based trader.
A U.S. packer noted the forecast came as a heat wave in California brings with it the potential to damage nuts still on trees.
“Everything seems to be showing that there’s not as good a crop, but on the buy side I really don’t see any excitement at all,” the packer said on Wednesday. “I really didn’t see much reaction at all from the buyers.”
According to Stratamarkets data, offers for October/November delivery Chandler JL were posted in the $0.88- 0.90/lb FAS range after the report was published, but the vast majority of offers had slipped back to the $0.80-$0.85/lb FAS range by Wednesday.
One U.S. trader said several Californian handlers expressed surprise at the forecast.
“Nobody expected this,” the trader said on Friday. “Most were forecasting 800,000+ tons. I do think the crop will shrink given the coming heat and the low market prices which make a lot of the older orchards not worth harvesting.”
The report revealed that the state-wide average inshell weight per nut in the 2022 sample was 20.2 grams, down from 22.2 grams last year, while the average inshell suture measurement was 32.4 mm.
The report noted that although California benefitted from heavy rain and significant snowpack in late 2021, the state has since experienced hot and dry conditions, which have reduced water allocations in many areas. The report also highlighted frost damage to orchards from several nights of freezing temperatures in February in the Sacramento Valley.
One U.K.-based trader noted that the estimate shows average inshell weights for some of California’s northernmost counties such as Butte, Tehama and Glenn falling by around 3-4 grams on-year.
This signifies that the average kernel weight for the 2022 crop in the northern areas is likely to be lighter. It also suggests a higher risk of empty shells in those regions. Empty shells occur when a lack of water prevents the kernel from developing within the shell.
In more southern regions such as San Joaquin, the estimate shows an inshell weight per nut at levels similar to last year. This could result in a two-tier Chandler inshell market based on the production region, the U.K. trader said.