Producers focus on balancing the supply-demand equation
Deceleration in production expansion after two decades of growth. (Courtesy photo)
WASHINGTON — The walnut industry is navigating a period of significant adversity, with several key regions grappling with a host of challenges that have impacted production and trade. These include persistent drought conditions, stringent water regulations, rising costs, logistical hurdles, intensifying competition, and subdued demand, all of which have exerted downward pressure on walnut prices. According to a recent RaboResearch report, as a result of these challenges, acreage reduction is expected in key regions. As for international trade, exports from Chile and China will decelerate, while the US will sustain its share.
Producers focus on balancing the supply-demand equation
In order to counter the many challenges they are experiencing, producers are expected to reduce acreage, particularly in areas with less competitive walnut varieties and more severe water constraints. “The industry’s focus is now on enhancing efficiency and producing higher-quality walnuts to achieve a more balanced supply-demand equation,” explains David Magaña, Senior Analyst – Fresh produce and tree nuts for RaboResearch. “Although prices are showing signs of recovery, they continue to linger below the break-even point in certain regions. But we remain optimistic about the potential for profitable operations in the near future.”
Deceleration in production expansion after two decades of growth
The global walnut production landscape has seen a steady compound annual growth rate (CAGR) of approximately 5% over the past decade. Four major regions – China (48%), the US (27%), Chile (7%), and the EU (6%) – dominate production and have collectively contributed to 89% of the world’s walnut output. While China and Chile have experienced CAGRs of 5% and 13% respectively, the US and the EU have seen a more modest growth rate of 4% CAGR over the past ten seasons.
However, the trend of increasing production is set to plateau, with some of the largest producing areas expected to witness a gradual decline in acreage due to economic and environmental pressures. The phasing out of older, less productive orchards and traditional varieties is anticipated to be a key factor in this reduction.
China remains the world’s top walnut producer and consumer
On the consumption front, China, the EU, the US, and Turkey collectively represent 75% of global walnut consumption. Notably, the UAE and India have emerged as significant growth markets, with CAGRs of 23% and 12% respectively, signaling a growing demand in these regions.
For China, the world’s top walnut producer and consumer, the upcoming 2023/24 season marks the fifth consecutive year in which domestic production will surpass consumption by over 100,000 metric tons, reinforcing China’s position as a significant net exporter. The industry consensus indicates a stabilization in China’s walnut production and export levels in the coming years.
The international trade outlook shows a slowdown
“The trajectory of global walnut exports has been remarkable, soaring from around 300,000 metric tons in the mid-2000s to approximately 1 million metric tons in recent seasons,” says Magaña. The past decade has seen a 7% CAGR in exports, with notable increases from China, Chile, and Turkey. Despite a reduction in its export share from 64% in the 2014/15 season to about 45%, the US remains the leading exporter of walnuts.
The future, however, points to a deceleration in exports from Chile and China, while the US is expected to sustain its share of 45% to 50% in the international walnut market.
The top five importing countries – the EU, Turkey, the UAE, Kyrgyzstan, and India – account for 62% of global walnut imports. Their respective shares stand at 31%, 11%, 9%, 6%, and 5%. Notably, imports by India, the UAE, and Kyrgyzstan have surged, with CAGRs of 25%, 18%, and 15% respectively over the last five marketing seasons.
–Rabobank
