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US walnut prices firm as initial heat damage reports suggest lower light availability

September 22, 2022

U.S. inshell and kernel prices rose in the global walnut market the week to Thursday in limited trading as U.S. packers said early harvest data revealed reduced light kernel availability due to heat damage.

Stratamarkets assessed Chandler JL inshell at $0.84/lb FAS U.S., up 2 cents on the week. Chandler LHP 20 was assessed at $1.96/lb FAS U.S., up 6 cents.

With new crop inshell prices already close to the lowest levels seen since Stratamarkets started tracking prices in January, market sources said U.S. handlers had little legroom to offer lower.

Inshell market

Offers for Chandler JL inshell prompt containers ranged from $0.80/lb FAS to $0.89/lb FAS, with reported trades executed between $0.78/lb FAS and $0.89/lb FAS. 

Market sources said that despite some pressure from inshell buyers, U.S. handlers resisted calls to lower their offers from their recent ranges, saying that it would be uneconomical for their growers.

Sources said a large European supermarket was pushing for new crop Chandler JL at $0.65/lb FAS , but one U.S. packer said he would not offer lower.

“At these prices, the growers can’t afford to take the sale, unless they’re willing to walk away from multi-generational ranching,  so they just have to say ‘this is too cheap,’” the packer said.

Although some packers reported receiving a higher number of inquiries during the week, demand for prompt inshell shipments remained limited.

European and Middle Eastern buyers are still chewing down excess stocks in warehouses and expressing buying interest further forward. Buyers and traders said they were confused by the wide range of inshell offers and were waiting for prices to settle before committing to larger volume purchases.

“If you know prices will be stable for 7-8 months, you can buy long-term and cover your position,” said a U.K.-based trader.

“But prices are changing so quickly, and nobody has confidence in the market so what they’re doing is buying the odd container here and there, hand to mouth.”

That situation is worrying for U.S. packers, some of whom are experiencing difficulty moving their inshell. They have a busy harvest ahead and need to juggle the reasonably slow sales start with a need to clear storage space for the incoming crop.

“Right now, we’re in a position where we’re starting harvest, and a lot of packers have sold little, and need October and November shipments on the books,” said a U.S. trader. “In many cases, they don’t physically have enough storage to get everything indoors if they don’t have some early shipments. We’re missing a big market like Turkey to come in and start buying some product right now.”

According to sources, a recent inshell tender from a large German supermarket that closed last week has not been awarded.

“[The supermarket’s] decision will determine where the rock-bottom market price might be,” said a Germany-based trader, adding that he believed the tender will be awarded in the next few days.

Chinese new crop 185 inshell offers were reported at $2.20/kg ($1/lb) FOB Tianjin this week, 5 cents up from last week. In the kernel market, 185 90% extra light halves were offered at $4.30/kg CPT Kazakhstan.

One Hong Kong-based trading source said stronger demand in the Chinese domestic market may be bolstering export prices.

However, the source added that Covid-19 lockdowns within China were slowing the delivery of walnuts from farms to processing units. As a result, the Chinese harvest may be delayed.

“Chinese sales at this point aren’t great, everywhere is in a kind of lockdown,” the source said. He added that a key industry exhibition at which an estimate for the Chinese 2022 crop will be announced was postponed until November 1.

Limited deals were reported for Chilean inshell but prices of larger categories firmed. A shipment of Chandler 32-36 traded at $2.55/kg FOB Chile on Wednesday, while an offer for Chandler 34-36 was posted at $2.95/kg FOB.

The Chandler 30-34 premium to the item’s nearest U.S equivalent, Chandler JL, increased 2 cents on the week to 15 cents/lb, the differential’s highest for three weeks.

Kernel market

Trade in the kernel market remained quiet with offers close  to prior-week levels and some larger packers holding off from offering as they continue to assess the impact of sunburn damage.

Prices, however, improved as the market digested reports of potentially lower volumes of light- colored material. U.S. origin Chandler LHP 20 traded twice at $1.95/lb and $2/lb FOB California and once at $1.90/lb FAS California. Higher half-count items such as Chandler LHP 80 made larger on-week gains, trading at $2.50/lb FOB California.

“$1.75 seems to be the buyers’ expectation [for Chandler LHP 20] but at that price, sellers would rather do inshell,” said a second U.K. trader.

He added that an approximate shell-out rate of 50% for the Chandler variety plus costs of processing, packing, labor and machinery made it more profitable for packers to sell the inshell product at $0.80/lb FAS.

High inventory levels in Japan are softening demand for U.S. kernels in that market, and further pressuring prices of Japan-specification Chandler half-count items, a U.S. trader said.

Light color availability

The impact from a heat wave in California earlier this month became clearer as multiple packers reported reduced light-color kernel availability.

One U.S. packer said initial results from his harvest of Ivanhoe, a variety that harvests about four weeks ahead of Chandler, revealed an approximate 15% reduction in the supply of light kernels, with counts of light amber and amber up.

“We’ll have an excess of Combo, amber and black but there’ll be a shortage of light and that has not been priced into the market,” the packer said.

He added that sales of Combo – a combination product of light and light amber pieces from several varieties —  would be difficult in the domestic market because current prices were at production cost levels.

“But I can’t raise the price of Combo when Chandlers are so cheap,” the packer said. “They are shoving everything below them down.”