China a growing concern for walnut exports

Agri-Pulse

15 jun 2022

China has outpaced the U.S. as the world’s top walnut producer, as California growers grapple a slew of setbacks.


Bill Carriere, who chairs an executive committee for the California Walnut Commission told the State Board of Food and Agriculture last week that supply chain disruptions is the top problem, followed by rising inflation costs, drought, tariffs, trade policies and fallout from the war in Ukraine.


Bill Carriere, California Walnut Commission


“If we get the logistical things figured out, that's our competitive advantage,” said Carriere, who has assumed an interim leadership role for the commission and California Walnut Board amid a search for a new CEO and executive director. “Everything else being equal, we win.


”California walnuts have plenty of market demand and the growers have a track record of honoring contracts on time with high-quality products. And the state remains a dominant player in the global marketplace, with walnuts ranking fourth in California export commodities, at $1.2 billion.


Grower returns, however, have been below the cost of production for two out of the last four years, and Carriere expects it to be worse this year. Unlike almonds and pistachios, walnuts face significant overseas competition.


China owes part of its success in becoming the world’s top walnut producer to the U.S. “doing such a good job” of marketing the health benefits of nuts and helping to raise the price worldwide, according to Carriere.


“China took this as an opportunity to bring their farming population out of poverty,” he said. “They really heavily subsidized planting walnuts in China.


”The Xinjiang region in northwest China has had bumper harvests by taking advantage of favorable growing conditions along the plains, according to the USDA Foreign Agricultural Service. While U.S. walnut exports continue to grow, their share of the international market is shrinking as a result of China’s growth.


“We are the largest exporter still,” said Carriere. “But our competition from China is starting to grow.


”Related ArticlesUS ag exports are growing, but China deal isn’t a panaceaMexico’s growing taste for peanut butter offers a new front for US exportsChina exported about 2% of its crop just 10 years ago. Today they ship 17%, about 183 metric tons—more than California’s previous competitor, Chile, produces in a year.


Walnut growers are now losing their ability to compete in markets with China and other tree nuts due to shipping delays. California growers export 66% of the crop, nearly entirely through the Port of Oakland, since it had been cheaper to ship a container to China than truck it to ports in Long Beach or Los Angeles, said Carriere.


Fall and winter holidays mark the prime season for selling walnuts. The lack of ships visiting Oakland to pick up cargo, however, meant shipments scheduled for Christmas arrived in January. Nearly a quarter of the crop is typically shipped in that timeframe, though this year it was just 13%, amounting to 70,000 tons in lost sales. In a trend familiar to many agricultural exporters, buyers have renegotiated contracts or just canceled them altogether.


In the meantime, China and Chile have been able to circumvent some of the international logjam to get more exports out, eroding the U.S. market share.


Unlike almonds, walnuts are somewhat perishable, owing to the abundance of omega-3 fatty acids, which has led to many containers going rancid while sitting at ports. That challenge is compounded by the reality that inventories are now twice as large as they would be in a normal year—with another record crop expected this year, owing to new varieties with higher yields per acre. Carriere noted that USDA has purchased $30 million in walnuts, sending products instead to food banks and school lunch programs, and it has helped enough that the commission will ask for another buy this year.


But it pales in comparison to the estimated $1.7 billion growers have lost over the last four years.