The new edition of Chilenut's market reports, a biannual publication, intends to contribute information on the season's closing and the perspectives for the Chilean walnut. It will give an end of the year account for the whole of the country, and reveal how the beginning of the production of the northern hemisphere is seen in terms of product expectations, stock, quality and opening prices.
In mid-March the report will provide forecasts of the Chilean harvest and the inventory situations and prices at which the Northern Hemisphere's season closed.
We are grateful to La Invernada, the company that produced this detailed report for Chilenut:
September has been quite buoyant globally in the nut industry. On the one hand we have received the new report of the Chilean Walnut Commission, updated up until the 35th week of this year; and on the other the US harvest report with very relevant information.
If we first analyze Chile's situation, it is remarkable the advance in shipments that the industry has had this year. Shipments are already reported for 80,373 tonnes, 58% over the previous year and accounting for 84% of the harvest. If we add to these the commitments still to be shipped, which are also above the previous year's, we can say that the harvest is practically sold, leaving only 1,562 tons of equivalent in shell product for sale.
It should be noted that the crop estimate was corrected upwards by 2,000 MT compared to the previous report.
Undoubtedly, it has been a very dynamic and active season, where the ability of the Chilean industry to handle higher volumes of production, and to place them satisfactorily in the different world markets has been demonstrated.
We started with a strong market of shelled walnut that was favored by the lack of USA product, which was maintained throughout the season. Something to highlight has been the diversification of markets for this type of product that we have achieved as a country, generating alternative channels to the traditional Turkish market. India, Morocco, the United Arab Emirates, Italy, Spain and Germany are starting to play an important role in maintaining less concentrated and healthier sales for Chile.
Prices ranged from about USD 3.85 CIF to USD 4.00 CIF (March - April) depending on the quality for a Chandler walnut 30+ mm, then USD 3.80 - USD 3.70 CIF (ending April - May) to finally rebound and market at USD 4.10 to USD 4.15 CIF (June - July) and at the end of the season when the stock was almost nil.
Although there have been substantial advances in distribution, there is also the challenge of maintaining these advances and continuing on this path, for it is essential to maintain high standards of both fruit quality and commercial relations abroad. We still enjoy a very good reputation due to the seriousness of our exporting companies, but we must be careful with specific cases that can affect this great asset and the brand that has been created.
Walnut without shell
In the case of nuts without a shell, the market began slowly as a result of high walnut prices, pushed by California nuts and reduced available sales stocks for that country, which earlier this year showed historic shipments.
High prices generated strong demand for products with a lower percentage of halves. Buyers instead of raising the price, preferred to lower their quality via reducing the percentage of halves. As a result, the market for quarters and pieces was sold out leaving only halves available which were moving much slower throughout the season.
Today, the availability of fruit is almost nil where exporters are compromised in about 98% of their stock approximately.
Prices are expected to remain stable or with a slight increase and the remaining volume will be placed in the coming weeks.
The quality of the fruit has been excellent this year as it sees high percentages of extra light and light product in all of its varieties. It is very important to be able to maintain these levels of fruit as a distinctive differentiator of the Chilean fruit. Finally color and performance is paid for.
One of the benefits of the year 2016 is that Chile had to open an almost unexplored market, that of dark colors and yellow. It is so much, that this season this type of products has also had very good dynamism, taking advantage of the great majority of its volume being processed without major losses.
The challenge is to continue searching for new markets and diversifying our exports, consolidating our position in markets that value quality.
In terms of markets the declines of Italy, Korea and Holland are mainly explained by price. In the case of Italy, stocks increased earlier this year with California fruit, anticipating price increases in Chile. For Korea, the situation is similar, they value more the California walnut because of its country's link with the USA, and use to Chile only as a link and in products of low value, when the prices increase they reduce their buys immediately. Holland is an opportunistic market of traders so when the market is active and prices high their purchases are reduced. However, in the case of Brazil the situation is different, and its decrease is justified more by a political - economic issue and one which historically has been a late buying market since they do not have an early need for fruit. The problem is that if the demand is activated they will have nowhere to get them prior to Christmas.
California released the harvest report for this year, which corresponds to their 2017/2018 harvesting year (California Walnut Objective Measurement Report). It should be noted that production was expected to increase from the previous year by approximately 5% and the surprise result is a 5.2% less than the previous year.
This reduction corresponds to 32,659 MT less than the previous year and about 60,000 MT less than the initial estimates.
The accuracy of this report is quite good so a harvest should be expected around the values reported and there is consensus on the seriousness of the report, which can be seen in the following table.
The news of this lower production has already affected the prices of the California nut for this new season, increasing around 10 cents per kilo for walnut in shell and between 20 - 25 cents unshelled. Obviously there is no final adjustment to the price and will also depend on production in Eastern Europe, China and Turkey, but some effects have already been seen.
Another very important factor is the quality expected for this year of the California nut. The temperatures have been very high and it is estimated that it has negatively affected the quality in terms of the nuts' color.
Chile is almost without a nut supply, the USA has a lower production and a very low bond stock (estimated around 30,000 MT), with a quality possibly affected by the heat which will produce less availability of light colors. If the other producing countries do not have big changes, a fast California movement and again a low harvest link for 2018 is expected, which removes price pressures on Chilean nuts next season.
However, much remains to be done, but so far the market is generally dynamic and firm in its price.