Walnuts: Moldova and Ukraine in for competition

Rise in shipments to Europe

Europe is an important export destination for US walnuts, especially in 2021/2022 as California Walnuts recently issued preliminary shipment report shows. Inshell shipments to Europe rose by more than 20% to 148 million pounds as compared with 2020/2021 and accounted for 49% of total exports last season. US inshell exports, in fact, climbed to nearly 300 million pounds in 2021/2022, whereas domestic shipments declined to 195 million pounds. Germany most notably stepped up buying by more than 30% and retained its position as leading export destination for US walnuts, followed by Japan and South Korea, where shipments are down.

Prospects for 2022/2023 are not quite as encouraging. Issue is that frost in February coupled with prevailing hot and dry weather conditions in recent months prompted the United States Department of Agriculture National Agricultural Statistics Service (NASS) to revise production estimates downwards to 720,000 tons. Although this is only 1% down on last year’s production of 725,000 tons, it should be noted that it is mainly the 3% increase in acreage to 400,000 acres that prevented sharper declines. Average yields range 3.3% lower at 1.80 tons/acre this year.

Moldova to get a head start

These estimates have been closely followed in Moldova, where producers are keen to start exporting the new crop before European and American varieties arrive. Optimism prevails as the harvest campaign started ten days earlier than usual as EastFruit reports with growers presently harvesting local varieties such as Peschansky walnuts. Although quality is reported to be above average so far, concerns are being voiced over large volumes of walnuts with a drying pericarp. Trouble is that these nuts need to be processed quickly to avoid kernels from darkening and obtaining a strange taste. Producers are, nevertheless, confident that the early start to the harvest campaign will give them a head start and negotiations with buyers in Italy, Slovakia and Germany and France are underway.

Ukraine to step up exports

Although many uncertainties naturally persist in war-torn Ukraine, these are not the only issues producers are confronted with. The USDA’s local Foreign Agricultural Service (FAS) has recently issued a new production estimate for 2021/2022 that undercuts the USDA’s official figure of 132,745 mt by 13%. Issue is that growing conditions were below average between May and August 2021 and soil moisture was lacking. As similar growing conditions prevailed this year and growing areas are located in regions occupied by Russia in February, production is expected to take another 11% dip this year.

Exports should, however, rebound by 57% in 2022/2023 due to the grain corridor agreed between Russia, Ukraine and Turkey. Ukraine mainly exports shelled walnuts, of which it shipped more than 21,500 mt overseas between September 2021 and May 2022. This, in other words, is an 8% decline on the same period in 2020/2021. While shipment to the EU remained on a similar level of 15,300 mt, exports to Turkey slumped by 23% to 1,400 mt, to Azerbaijan by 23% to 1,200 mt and to Belarus by 75% to 226 mt. In-shelled exports also declined sharply by 34% to 5,700 mt in the same period. These sharp declines resulted in higher carry-in supplies for the new season.

Although beginning stocks have more than tripled, it is to be questioned in how far exporters will be able to sell supplies from last year’s crop given that these stocks may not meet the quality standards in many importing countries. The stocks may very well, however, impact prices as exporters will have to go down in prices to get rid of the large stocks. While the sharp declines in exports witnessed between September 2021 and May 2022 vividly demonstrate the impact the war has had in cutting ties with countries in the east, another problem is that Ukraine mainly ships shelled walnuts in halves. The global market, however, prefers smaller sizes, which causes suppliers in Ukraine to lose out against their competitors in the United States, China and Chile.

Prices tumble in Europe

With the new crops arriving in the northern hemisphere, the spot market prices for Chilean walnuts have declined sharply in Europe in September. The Prices for US walnuts have also declined, albeit to a much more nominal degree. Suppliers are offering Chandler, LHP, 20% at EUR 4.90/kg (USD 4.61/kg) FCA Spain.

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