Editor’s note: This is the second report in a three-part series on tree nuts. View the first part here: What does the future hold for the almond industry?
It’s been a time of transition for the walnut industry, says Roland Fumasi, head of RaboResearch Food & Agribusiness for North America.
“We’re producing too much; we had a record production year last year,” he said.
Fumasi says the pace of walnut acres coming out of the ground has intensified in the last few years as growers remove older walnut varieties. And while the industry focuses on popular new varieties such as Chandler, he said, “We just have too many walnut acres. Given market dynamics, probably even some of that Chandler acreage needs to come out.”
Fumasi says that despite walnut shipments being up 23% earlier this year, the industry faces stiff competition globally.
“China has now become a net exporter of walnuts,” he said. “We have to be able to compete against China in some markets based on quality, which in a typical year, we have superior quality. That was not the case in the 2022 crop year because of some weather events that really hurt the walnut quality out of California.”
He says the 2023 crop has good quality, and with lower prices, it has helped to move walnut inventory.
“But I would expect to see a continued increase in the number of walnut acres removed in California,” he said.
Walnut shipments
Robert Verloop, executive director and CEO of the California Walnut Board and Commission, said global walnut production was 2.9 million tons. California makes up about 26.8% of global production. The state also makes up about 44% of global trade volume, he says.
Verloop says the 2023 crop was a record for the state at 823,000 tons; with the 140,000 tons carryover from 2022, the state had a marketable volume of 960,000 tons.
“The industry is optimistic for the upcoming crop year with a more normal crop size (production and carry-in),” he said.
Although the California Walnut Board Commission will not release its 2024-25 crop estimates until early September, Verloop says the industry expects this upcoming season to be on par with 2020 and 2021 crop sizes, around 725,000 to 785,000 tons. He says the industry also expects a smaller carry-in of around 90,000 tons.
Verloop says inflation took a bite out of the entire nut category, but the price of walnuts remained steady.
“In 2023, walnuts were a great value in the nut category, showing a lower average selling price per pound than many other nut varieties,” he said. “The average price per pound of walnuts was $6.76 per pound, compared to almonds ($8 per pound), cashews ($8.32 per pound), pistachios ($9.91 per pound) and mixed nuts ($7.57 per pound).”
Fumasi says this lower carry-in is due to strong movement earlier in the year and that’s a bright spot for walnuts.
“Through March in walnuts, 70% of our inventory was shipped,” he said. “That’s the highest the highest percentage since the 2016 crop year in terms of percentage of inventory sold.”
Future goals
Verloop says expanded exports are a big focus for the California Walnut Commission in Southeast Asia and Northern Africa. The Walnut Commission recently received $7 million from the USDA Regional Agriculture Promotions Program to help expand California walnuts into new markets and boost trade with core export markets. Verloop says the California Walnut Commission utilizes $4.2 million in USDA’s Foreign Agriculture Service’s Market Access Program.
“The overarching goal is to drive distribution, consumer demand and consumption of high-quality California walnuts in more markets globally,” he said.
Verloop says the USDA funding helps the Walnut Commission tailor its message to each market’s needs, consumer research, market access and long-term growth.
Fumasi says one area where the walnut industry faces significant a challenge is that consumers often don’t see it as a snacking nut as they do almonds and pistachios.
“Walnuts want to be seen in that same stacking nut, versus traditionally almonds and pistachios,” he said.
And Verloop says the walnut commission, while focused on expanding its international presence, is also focused on building demand in North America. He says the commission plans to drive distribution and sales in the produce department through sales promotions.
The commission’s retail merchandising directors work individually with retailers to best capture sales through category management data. And the California Walnut Commission’s chef-in-residence works with foodservice to expand walnuts on menus.
“Although in its infancy, the new domestic efforts to date are showing results, with U.S. shipments being up 11% for kernels YTD through May 2024,” he said.
Verloop says the California Walnut Commission recently conducted consumer research to better understand how to increase domestic consumption. He says a major focus for the commission in the future will be on delivering the best taste experience for consumers through education on best practices for shipping, handling and storage.
“We will continue to work to elevate walnuts [and promotions] in produce departments, repositioning walnuts from being a traditional baking nut to being consumed as a nutritious snack or ingredient in your favorite recipes,” he said. “We are also improving the inclusion of walnuts onto restaurant menus and into new products, investigating more package size options for greater convenience, new exciting flavor options and more inclusion of walnuts into CPG products.”
Verloop says walnuts are a perfect fit with the growing interest in healthy eating and plant-based diets.
“With over 30 years of CWC-supported health and nutrition research, consumers are keenly aware that walnuts can play a positive role in improving heart health, brain health and healthy aging,” he said.
Fumasi says despite the positive momentum, the future for walnuts is a bit uncertain. While price improvements help the industry stabilize its supply and carry-in, he’s uncertain if the amount of acreage coming out is enough to keep the momentum moving forward.
“The question remains: how much acreage has been coming out in recent months? And will that be enough to limit supplies next year to actually see wallet prices get up into a profitable range?” he said.
