Last fall, California’s walnut growers expected to harvest an estimated 485,000 tons of inshell product, which would have been about three percent smaller than the 502,000-ton crop in 2010 — the largest ever and the third straight year of record production.
But, based on receipts reported by handlers through the end of December, in mid-January the California Walnut Board revised the actual crop size figure to 460,000 tons. Some of that is being attributed to last spring’s wet weather during the bloom. Also, say growers, the trees needed a rest this past season following three big crops in a row.
With overseas demand continuing to climb, the smaller 2011 production, combined with little carryover from 2010, has boosted prices paid to growers. For example, the inshell market value of top-selling varieties like Hartley and Chandler has increased about 25 cents to 30 cents per pound above September opening prices for the new crop. Meanwhile, prices for walnut meats are up about $1 since early September.
With the 2011 crop likely to be another sellout, walnut grower Peter Jelavich, Yuba City, Calif., a director of the Walnut Bargaining Association, looks for these prices to hold through the current marketing year.
The situation has sent some handlers scrambling to meet demand. Many are being careful not to over-sell the crop, he notes.
“Even at the higher prices, I’d say we’ll still move the whole crop this year. That, plus the low carryover, puts pressure on the market supply to meet demand. Some handlers are probably rationing shipments to make sure they can satisfy their regular customers, and I’ve heard of other handlers who have had to buy product outside of their usual grower base to fulfill commitments.”
The past three years of increasing demand, even as crop size grew, has encouraged growers to plant more trees — but it takes five years for walnut trees to start producing a marketable-size crop.
“At the moment production and demand are nearly in balance,” Jelavich says.
Prior to harvest, inshell buyers had driven the price of Hartleys to $1.65 per pound, exceeding the $1.40 level suggested by many in the industry, he says. By early February that price had risen to $1.90-1.95. During the same time period, the market for 2011 Chandlers, which opened in September at $1.75 a pound, had advanced to $2.00-2.05 per pound. In September, growers were selling regular light halves and pieces for $3.85 per meat-pound; five months later, the meats were going for about $4.75 a pound.
These rising prices haven’t dampened sales — in the four-month period ending Dec. 31, 53 percent of the new crop had been sold. That’s the same percentage figure as the first four months of the 2010 marketing year, which had a bigger crop with lower prices.
Most of the increased overseas shipments are going to Asian and Turkish buyers, Jelavich notes. China, which also grows walnuts, didn’t even begin buying California walnuts until the 2008 crop year. Chinese and Hong Kong purchases of U.S. inshell walnuts through the first four months of the 2011 marketing year were down 7 million pounds, from 78 million pounds a year earlier. Meanwhile, Turkey purchased 5.5 million pounds more than a year ago. These countries accounted for approximately half of the inshell movement through 2011.
Vietnam, which bought 3 million pounds of inshell walnuts during the first four months of the 2010 crop marketing year, bought over 5 million pounds of the 2011 crop through the end of December.
Another Middle East buyer, United Arab Emirates, took 13.5 million pounds of 2011 inshell walnuts from the U.S. That compares to 8.5 million pounds the country purchased from the 2010 U.S. crop.
At the same time, shipments of new crop inshell walnuts to Europe are down for the first four months of the current marketing year compared to the 2010 crop. For example, purchases by Germany, Italy and Spain have fallen off from 69.5 million pounds in 2010 to a little over 56 million pounds, about a 20 percent decrease.
One reason for those declines, Jelavich suspects, is the current high price levels of California walnuts and the minimal supplies available for sale. Those prices and the shorter-than-anticipated crop size, he says, also help explain why U.S purchases of the 2011 inshell walnut crop declined to 12.5 million pounds for the first four months of this marketing year. That was down almost 8 percent from the 2010 crop in the same period.
“As walnut prices have risen to where they are now, U.S. consumers have backed off a little from purchases,” Jelavich says. “Probably the best thing for our industry this year would have been to have had a bigger crop that was priced more in line with what consumers were used to paying.
“We could have sold that extra production because the demand is there. If the 2012 crop is closer to the 500,000-tons produced in 2010, traditional markets for California walnuts should return with only a slight decline in prices.”