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US inshell prices improve as USDA forecasts lower California production

September 8, 2022

U.S.-origin prices in the global walnut market were mostly steady to higher in the week to Thursday as sellers there raised new crop inshell offers following a lower-than-expected USDA objective crop estimate.

Stratamarkets assessed Chandler JL inshell at $0.85/lb FAS U.S., up 1 cent on the week. Chandler LHP 20 was assessed at $1.90/lb FAS U.S., also up 1 cent. Prices for less-actively traded items leveled or lost ground.

Inshell market supply

Packers in China lowered their new crop inshell offers as sellers of new crop from the U.S. and China search for ready buyers in key destination markets.

Chinese origin 185 inshell sized 30+mm was offered at $2.23/kg ($1.01/lb) FOB Tianjin on Wednesday, down from $2.35/kg ($1.07/lb) FOB Tianjin a week ago.

“[Chinese inshell offers] are dropping every day,” said a U.S.-based trader, adding that although initial offers for 185 had been lodged at around $2.50/kg FOB China, “Chinese sellers were telling buyers it was an opening price and it would eventually go lower, so when you offer like that, nobody wants to buy.”

Declining freight rates from China to Turkey could allow sellers in China to continue lowering their offers, said a U.S.-based packer on Wednesday. He said those rates have recently fallen from about $8,000 per container to $6,000.

“I’m expecting prices to be lower from China in the coming weeks,” the packer said. “A couple people I’ve spoken with said [China sellers] have just been testing the waters as they wait for some improvement in the ocean freight.”

In the wake of the USDA’s objective forecast released on Thursday (see story on page 3), some California packers raised offers for U.S. origin Chandler JL with transactions executed at slightly higher levels compared with the previous week.

The item was offered in the $0.80-$0.85/lb FAS range prior to the report but trades were registered between $0.85/lb and $0.88/lb FAS after the forecast. However, by Wednesday, 5 loads were sold at $0.79/lb FAS.

Another 3 loads of Chandler JL were sold at $0.88/lb FAS on Wednesday but reported after Stratamarkets’ market-on-close for weekly assessments of 1 p.m. CET on Thursday.

While U.S. walnuts sold to Turkey are saddled with a 25% customs duty – 10% higher than other origins — current market prices and ocean freight rates indicate that U.S. nuts still price into the country considerably cheaper than Chinese product.

According to Stratamarkets’ calculations, U.S. Chandler JL at $0.85/lb FAS U.S. shipped to Turkey with ocean freight at $0.13/lb would command a duty-paid delivered price of $1.23/lb. In contrast, the duty-paid final price for Chinese 185 sold at $1.01/kg FOB China on freight of $0.16/lb would be $1.35/lb.

One added complication for U.S. and Chinese handlers as they seek to ignite the new inshell season is that counter-seasonal producer Chile still has volumes to offload from its 2022 crop harvested in March.

Some smaller Chilean handlers said they’ve completed their inshell sales for the year. However, larger companies in Chile continued to report transactions as prices decline. Stratamarkets assessed Chilean Chandler 30-34 at $2.15/kg FOB Chile on Thursday, down 25 cents on the week and its lowest since Stratamarkets started tracking the item in February.

Chilean Chandler 30-34 was offered as low as $2.20/kg FOB Chile on Wednesday, while one load was sold into India at $2.70/kg CFR.

“It’s always healthier [for the U.S. market] when Chile is pretty much sold out of the market by the time California starts harvest but that’s not the case this year,” said the U.S.-based trader. “They have more availability than they would like to have.”

Inshell market demand

Turkish inshell market activity is limited with demand focused mainly on the remaining stocks of 2022 crop Chilean product.

“Premium quality Chilean Chandler is moving, but the lower qualities and one-year old U.S. product is not,” said one Turkey-based trader, adding that stocks of 2021 crop Chinese inshell at the port of Mersin are now depleted.

Chilean Chandler 30-34 with a 50% kernel yield traded at $2.50/kg EXW Mersin on Tuesday, while 32+ with a kernel yield of 54% was sold at $2.90/kg EXW Mersin on Monday.

According to the trader, another factor contributing to the slow Turkish market is that sellers have shortened the terms of their credit sales due to weak economic conditions and the Turkish lira’s dramatic fall against the U.S. dollar.

Whereas previously walnut sellers were happy to offer two to three month credit terms on their sales, the terms have mostly been slashed to 10 days, the trader in Turkey said.

“This means buyers are forced to buy only with the money they have in their pocket,” the trader said. 

Kernel market

Kernel demand was increasing in the Middle East and Europe as the summer holiday season comes to an end, sources said, but inquiries were often of a tentative, price-checking nature rather than a solid intention to purchase.

European demand is expected to kick in later than normal this year due to larger than usual bookings of U.S. current crop during the spring and summer as buyers sought to navigate logistics problems.

Prices of U.S. kernel items drifted, in line with prior week levels although there was a wide variance in offer levels.

A consignment of U.S. new crop Chandler LHP 20 traded at $1.90/lb FAS on Tuesday while new crop Chandler LHP 80 was offered in the $2.50-$2.60/lb FAS US range without attracting buying interest. Chandler LHP 80 from the 2021 crop traded about 30 cents below new crop levels, sources said, although no 2021 crop trades were verified.

One factor keeping a lid on prices is large stocks of current crop kernels at European ports, said one European trader.

The trader said current crop Chandler LHP 40 was available on a FCA Rotterdam basis at Eur 4/kg ($1.81/lb), less expensive than the lowest offer heard for new crop material at $1.95/lb FAS U.S.

“Business with shelled walnuts has turned difficult due to the market instability,” said one Chilean packer. “Sellers lower the prices in order to sell one or two containers, giving the impression that tomorrow another person will appear with lower prices, so the buyers prefer to wait.”