Since bottoming out last April, the market for California walnuts has continued to strengthen.

“We’re not only producing more walnuts than ever, but we’re also selling them,” says Peter Jelavich, Yuba City, a long-time grower and a member of the Walnut Bargaining Association’s board of directors.

The state’s 436,000-ton 2009 crop was the second straight record-breaker following the 2008 crop officially figured at 434,000 tons. That crop was 70,000 tons larger than any previous walnut harvest.

Last year, Jelavich says, processors in the U.S. moved 100,000 tons more than initially estimated, which shrunk carryover for the current marketing year to what he calls a “very manageable” 60,000 tons. That, plus the new-crop production, put the total supply of walnuts available last fall at 496,000 tons.

“Through January of this year, we’ve already moved over 60 percent of that total supply,” Jelavich says. “There’s a feeling in the industry that we will move all the 2009 crop by the beginning of this year’s harvest.”

One reason California walnuts are selling is that China, Hong Kong and Turkey, as well as other importers, have stepped up their buying activity significantly, he says.

“Most of these are in-shell sales. These buyers are reprocessing the walnuts and selling them to other countries where we have no access, or limited access, as well as countries that have been traditional markets for us. This is interesting because China produces more walnuts than we do — but the premium quality of California walnuts is in demand.”

Health benefits of walnuts have spurred more consumer buying in all markets. Jelavich cites one industry survey which found that the proportion of American consumers who believe walnuts are good for human health has increased from 67 percent to 87 percent. The study found that 55 percent of those surveyed believe walnuts provide more health benefits than other nuts.

While production has ramped up over the last several years, the bearing walnut acreage has increased only about 10 percent in the last decade to the current total of 220,000 acres. “With this rate of increased plantings and the use of more prolific varieties, California growers are probably capable of producing a 500,000-ton crop in the next several years,” Jelavich says.

The strong walnut market has put smiles on the faces of California’s handlers, while growers are waiting to see if their returns will show similar increases. Since mid-September 2009, the market price for light halves and pieces has climbed from $2.40 per meat pound to $3.60 and higher.

Jelavich tempers the current optimism in the industry with several factors that could dampen the walnut market.

For example, he wonders how long newcomers like China and Turkey will continue buying California walnuts.

How many of these same walnuts will end up competing against others grown here at home in traditional overseas markets for California walnuts?

One reason for increased sales of California walnuts on the world market has been a relatively weak dollar, which makes U.S. walnuts a more attractive buy. That could change if the dollar increases against currencies other than the euro.

Food safety is an ongoing concern. “Here in California we have some pretty strict processing requirements to help keep our product safe to eat,” Jelavich says. “But, we have no control over how other counties handle our walnuts.” A world walnut scare could impact everyone’s walnut market.

To keep the 2010 crop moving, Jelavich believes walnuts must be priced competitively. The downturn in the world economy in the fall of 2008, wasn’t the only reason buyers abandoned the walnut market completely in December of that year and into January 2009.

“Given the large crop we harvested that fall, walnut prices opened a little too high,” he says. “Right now, things are going well, but there are ways the market can go down. I’m not predicting they will, but when prices get as high as they are currently, it’s hard for them to go higher. A lot depends on the size and quality of the 2010 crop.”