Nuts

Market Insights


June 2023

Walnuts

The walnut market in May experienced significant developments, with potential implications for the overall supply and pricing. Crop receipts for the 2022 crop year remained unchanged at 747,870 tons, but historical trends suggest an upward adjustment by the end of June, which would result in a record high total supply of around 896,000 tons (+8% compared to 2021). A notable decision was made by the CWB to lower the crack out rate to 40.1%, a near 4% decrease from the previous running average of 43.9%. This adjustment was driven by the lower quality observed across the state, particularly in light kernel outputs. The new crack out rate has led to inflated shipment numbers for the current crop year.

Shipments performed well in May, reaching 71,175 tons, which represents a 23% increase compared to the previous year and a 70% increase compared to the eight-year average of 42,000 tons. The strong performance in shipments can be attributed to two main factors: the shipments associated with the USDA purchase and the adjusted crack out rate, which significantly increases the inshell equivalent shipment volume. Exports, although still underperforming, showed improvement compared to April shipments (-8.6% vs last year). Unshipped inventory is now estimated to be 265,434 tons, this is 5.7% higher than last year when we had 8.3% less total supply. The USDA purchase continues to exert a positive effect on shipments, resulting in a significant boost of 20% beyond our initial forecast. Combined with the adjusted crack out rate, we anticipate above average shipment performance for the remainder of the season.

Reported commitments in May saw a considerable increase of 25% compared to last year, with new sales FTM rising by 13% compared to the same period last year. This growth is attributed to the positive influence of the USDA purchase and the lower crack out rate. The sold percentage of total supply is now estimated at 91.3%, a 4.6% increase compared to last May.

The carryout projection has been revised to 92,000 tons, a 32% reduction from last year and a substantial 60,000 tons decrease from last month's projection of 152,000 tons. The USDA purchase has achieved its objective of reducing lower quality combo inventory from the market, providing relief to handlers who previously faced uncertainty due to holding undesirable inventory. Lighter walnuts are becoming increasingly scarce, leading to a slight price increase in recent weeks. However, the true inventory levels and their impact on pricing remain uncertain.

Chile: Chile’s 2023 crop was recently harvested and will fall short of expectations. Their 2023 crop receipts will finish around 168,000 MTs, down 10% vs last year’s crop of 187,000 MTs and down 12.5% vs this year’s expectation of 192,000 MTs. Chile’s carryout is always minimal, resulting in a total supply of 170,000 MTs, down 10% from last year’s 189,000 Mts.

China: China’s 2023 crop is forecasted to be flat at 1.4 mn MTs. This is most likely due to the inability to get reliable information out of China. Their 2022 crop carryout is forecasted to increase to 120,000 MTs. This results in a forecasted total supply of 1.52 mn MTs for 2023 crop, up 70,000 Mts or 5% over 2022 crop.

Bullish Trends

  • The USDA recently closed a very large bid, helping to ease the supply concerns
  • Shipments are now up 23% YoY
  • Chile’s 2022 crop has come in lower than expectations

Bearish Trends

  • CA has a record total supply this year
  • Lower crack out rate appears to be artificial and not widely accepted
  • China’s overall supply is forecasted to increase 5% this year
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