Walnut Market Update

R.L. “Pete” Turner November, 15, 2008

WALNUT MARKET/CROP REPORT

CROP:
The Walnut Marketing Board announced the October shipments at 75,812 inshell equivalent tons; 7,226 tons less than last year. Inshell shipments were 77.5 million pounds, compared to 76.9 million pounds last October. Shelled shipments were 32.0 million pounds, 6.2 million pounds less than last year. Total inshell equivalent year to date shipments are 95,406 tons; compared to 105,632 tons, down 10% from last year.

We will not know the final crop tonnage for several more months, but most industry leaders believe the crop will come in close to the 375,000 ton forecasted. Some packers feel the crop may be above the forecast as mid-crop receiving’s were very heavy compared to last year. However, this would have been the case anyway as the forecasted tonnage was up over 50,000 tons and the fact that the industry continues to loose the early crop varieties which have been replaced by Chandler’s, Howard’s and Tulare’s which are all mid-crop varieties. Thus, about 65% of the crop is being harvested and trucked to the packers over a 2-3 week period. This not only puts constraints on harvest/ hullers; but ultimately, on the plants and their processing facilities.

The quality of the 2008 crop is excellent with more than average Light material. The light kernel on the Chandlers, Howards, Tulare’s and Hartley’s appear to be above average as well as above average yields on almost all varieties.

The 2008 crop was 7-10 days later than last year which put even more pressure on the packers to meet vessel dates. In addition, there was a lot of questions on the availability of containers and vessels which added to the challenge. However, something must have gone right, as the industry shipped 77.5 million pounds of Inshell in October which is slightly more than we shipped last October.

MARKET:
In my more than I want to remember years in the walnut industry, I have never seen a walnut market that compares (so far) to what has impacted us during the past month or so.

First, the market for Chandler Light Halves & Pieces opened at $3.55 and Jumbo Hartley at $1.45, which was readily accepted by the buyers. Sales were brisk and forward bookings were heavy and the only challenge was getting containers and booking space on vessels.

Then, as some would say, the perfect storm hit. As with other businesses, our industry was hit extremely hard by the sudden collapse of the world financial institutions which put tight credit limits on buyers. The walnut market basically shut down and buyers had to set on the sidelines as they had no resources to conduct their business.

The markets quickly weaken with Chandlers Light Walnuts Halves and Pieces dropping from the $3.55 opening prices to $2.55 within a span of two weeks. However, Inshell Hartley’s bookings remained strong and only dropped about $0.05. Packers were facing not only the biggest crop in history, but had very few buyers to reduce their inventories. Thus, packers marketing strategy was almost solely based on their inventory positions.

This created a situation where some customers demanded adjustments to early contracts and some just walked away from their commitments. This has created some bitter relationships between seller and buyer, which is not a good formula for good business.

But, it now seems the market has finally bottomed out and bookings and shipments have been very active this week. In addition, the domestic market has picked up and as the walnuts prices are more favorable, bakeries, confectionery, and re-baggers are starting to add walnuts back into their mixes. I believe the domestic market will be stronger than it has been during several years of higher pricing. In addition, it is believed that the walnut market will stay around the current levels for the next several years. This will give the domestic users the confidence to establish longer market strategy for their products that contain walnuts.

The current market is still a little cloudy but most bookings on Chandler LHP is close to $2.35, regular LHP at $2.25 and CHP at $2.15, and Jumbo Hartley’s at $1.35. There have been sales at lower pricing but most of these seem to have disappeared over the past week.

I believe our industry is over most of the financial troubles and I see a more stable market going forward. We have not lost any Inshell sales as Italy, Germany and Spain are purchasing as heavy as ever. Turkey continues to purchase Inshell Chandlers and is 2.3 million pounds ahead of last year. Right now, Korea seems to be the only country to be purchasing less than at this same time last year.

Please let me know if you have any questions or comments,

Regards,

Bentzy
Bentzy Klein
Bentzy's Brokerage
Talknuts.blogspot.com