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U.S. walnuts face stiff competition from Chile, China

Todd Fitchette wfp-todd-fitchette-walnut-processing-8.JPG
Walnut processing 8: Heavy U.S. walnut crops and flat global demand are not the only headwinds pressing against American walnut farmers. Growing competition out of Chile and China are affecting the industry.
American exports are relatively flat at about 400,000 metric tons of inshell equivalent, according to USDA.

U.S. walnut farmers are being challenged by more than the inability to export their crop because of shipping company practices. Competition from China and Chile, and flat global consumption likewise do not bode well for domestic producers.

A global walnut update from Rabobank's RaboResearch Food & Agribusiness division illustrates this.

Data from the U.S. Department of Agriculture and ChileNut reveal steady global walnut exports from Chile, while U.S. exports are relatively flat at about 400,000 metric tons of inshell equivalent. Though still smaller in volume, the trend lines for China and Chile are steadily increasing, according to the Rabobank report.

Related: U.S. almond exports down double-digits

David Magana, senior analyst in fresh produce and tree nuts for the bank says retaliatory tariffs against U.S. products by other countries is further hurting U.S. agriculture. Magana says tariffs by India and China continue to significantly harm U.S. export efforts as the two large countries are among the world's top growing markets.

"I would say the biggest competition for U.S. walnuts is coming from Chile," Magana said.

As Chile sells more walnuts to Europe and India, it also enjoys a lack of trade barriers that continues to choke U.S. export opportunities, he said.

Trend lines

Global walnut consumption has been relatively flat for the last seven years, according to the RaboResearch report. Moreover, historic monthly walnut shipments from the U.S. are trending at their lowest level since the 2018/19 marketing year. The California Walnut Board reports year-to-date walnut shipments from September through December at just over 200,000 short tons of inshell equivalent.

Magana says California walnut farmers will continue to see modest bearing acreage increases over the next five years. This comes as plantings over the previous several years slowed somewhat. Ironically, grower prices in the 80-cent range have not incentivized farmers to aggressively reduce acreage, the report reads.

Meanwhile, production from the most recent harvest is trending higher than the USDA objective measurement. That report said growers would harvest 670,000 tons of walnuts, a 15% reduction from the previous year's record crop. As of December, handler receipts exceeded 690,000 tons.

Related: How did almond exports fall so fast?

Chilean walnut exports are likewise expected to rise as they remain the second most planted fruit in Chile, behind sweet cherries. By 2024 Chile expects to produce over 200,000 metric tons of walnuts, up 25% from its current level.

"One of the highlights of the 2021 season was that India became the main destination for Chilean walnuts, replacing Turkey," the Rabobank report states. "Promotional campaigns and a good-quality, counter-seasonal supply, helped to increase the demand from India, which looks to be a promising destination for the coming seasons."

Silver lining?

As global sustainability calls increase, the Rabobank report suggests that the U.S. walnut industry is "well positioned to take advantage of opportunities related to lower greenhouse emissions and carbon reduction."

This could happen as carbon reduction targets within supply chains are sought and partnerships built to promote plant-based alternatives over animal protein.

"The regulatory framework in the US and other countries may provide economic incentives so that walnut growers can get credit for practices that increase sustainability," the report continues.

TAGS: Trade
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