JANUARY 2019 WALNUT MONTHLY MONTHLY MANAGEMENT REPORT AND DISCUSSION
On Friday, Feb. 8th, the California Walnut Board released the January 2019 Position Report. Our table of these figures are shown below:
Tons Tons %
JAN. 2019 JAN. 2018 Chg
Crop Receipts 672,723 627,798 +7.1%
Carry in 9/1 63,539 55,976 +13.5%
Total Supply 736,262 683,774 +7.7%
Monthly Shipments 77,173 55,632 +38.7%
Export Shipments 57,064 40,800 +39.9%
Domestic Shipments 20,110 14,832 +35.6%
YTD Shipments 369,496 353,906 +4.4%
YTD Export Shipments 260,282 254,299 +2.3%
YTD Domestic Shipments 109,215 99,607 +9.65%
Inventory 366,766 319,684 +14.7%
Shipment as % of Crop 54.9% 57.3%
Shipment as % of Supply 50.2% 52.5%
MMR and YTD HIGHLIGHTS
1)Monthly shipments up 38.7%
- Export shipments up 39.9%
- Inshell for Italy up 93.13
- Inshell for Algeria up 396%
- Inshell for Lebanon up 310.6%
- Inshell for Morocco up 66.5%
- Inshell for Turkey up 114%
- Inshell for UAE up 430%
- Inshell for Pakistan up to 1,993,004 from zero prior year.
- Shelled for Germany still down a disappointing 14.3% from 6,097,806 in 2018 vs. 5,242,008 in 2019
- Shelled for Jordan up 427%
- Shelled for Saudi Arabia up 243%
- Shelled for UAE up 269%
- Shelled for Japan down 8.5%
- Shelled for Korea down 9.52%
- Domestic shipment up 35.6%
- Shelled for USA up 35.8% and Canada up 3.65%
2) Year to date shipments now up 4.4%
- Export shipments up 2.3%. Middle East and Africa up 48% but Asia down 44.6%
- Inshell for Europe slightly down 3.76%
- Inshell for Lebanon up 69.2%
- Inshell for Morocco up 49.2%
- Inshell for Pakistan up 572.8%
- Inshell for Turkey up 15.4% to 74,733,938 LBS
- Inshell for UAE up 92.2% to 41,315,894 LBS
- Inshell for Vietnam down 35.36% to 10,757,259 LBS
- Inshell for China down 67.3% to 2,683,235 LBS
- Inshell for Hong Kong down 64% to 3,679,725 LBS
- Inshell for India down 40% to 12,329,356 LBS
- Shelled for Germany down 40.3%
- Shelled for Jordan up 275%
- Shelled for Saudi Arabia up 185%
- Shelled for Japan down 28%
- Shelled for Korea down 5.4%
- Domestic shipment up 9.65%
- Inshell USA shipments down 18.1% but Shelled USA shipments up 12.08% to 90,526,586 LBS
- Crop receipts should be pretty much finalized at 672,723 ton up 7.1% from the prior year
The walnut industry had a strong January 2019. More impressively, it had a stellar combined two months ending January 2019 up 25% with shipments of 154,185 ton compared with 123,040 ton the 2 month period the prior year. This performance has been expected and seem inevitable as the industry has been increasingly stingy with offers due to high packer comfort with shipments and large "on the book" commitments fueling strong momentum and higher prices. Strong increased shipments over the past two months mainly to the Middle East which is the Ramadan business that Chile had in the past years, is almost over with Chile anticipated to be back in the U.S and world markets shortly.
In the last 60 days, demand for Chandler Inshell abroad particularly to Turkey has been extremely strong. Prices for Inshell Jumbo Large Chandler has increased by about $.20/LB to $1.10 - $1.15/LB and offers have pretty much dried up. Using those Inshell prices, Packer's have extrapolated kernel prices as well, pushing the market up by $.30 - $.45/LB.
As we discussed in the past 60 days, small to medium sized packers have communicated shipment/commitment percentages between 75% - 95%. As the MMR report is not inclusive of "commitments", it was hard to sense this high commitment percentage in the numbers through November 2018. There was a question mark with the larger packers if they too were as well shipped or committed as the smaller packers. Alas, December 2018 was the first clue to the walnut market strength with strong shipments at 77,012 ton versus 67,408 ton in December 2017 and now the January 2019 shipment of 77,173 up 38.7% is the 2nd month in a row.
We discussed last month that the industry needed to sell an average of 47,000 ton for the 8 month period ending August 2019 to end the year with approximately 63,000 ton carry-out. Now, with this strong January 2019 performance, the average has dropped to 43,318 ton for the remaining 7 months. Last year, the industry sold an average of 37,857 ton for the remaining 7 months but on a much higher average market price. Packers are confident that February 2019 will also be strong and with the average price for LHP still over $1.00/LB less than this time last year, the industry is confident that the recent price increases will stick with possible further increases to come.
Chile will begin discussing prices within the next month and while their Serr variety will be available to ship in April and their Chandler variety in May, they will not want to open too high and with California's prices rising $.30 - $.45/LB in the past 60 days, this will allow them to be even more competitive with California albeit Chile is normally priced at a premium.
USDA Walnut Tender - The 2nd USDA walnut tender hit the street on 1/17/19 due 2/7/19 for a whopping 8 million pounds of walnut pieces. Many packers will not and cannot quote. With a scarcity of darker product, those packers that can quote will most likely offer LHP or Light Pieces thus pulling even more inventory out of the market.
Pricing for walnut material is as follows: Domestic LHP $2.60-$2.90/LB, Export quality 20% LHP $2.70 - $3.10/LB. CHP is in the $2.40/LB to $2.50/LB range with many handlers being very short of material. Chandler Halves in the $3.15 to $3.30 /LB range. Inshell Jumbo Large Chandler $1.10 - $1.15/LB.
Conclusion - The Walnut Industry has had two pretty good months in a row and has increased Inshell and LHP prices by 20%. The approximately 366,766 Inshell equivalent ton inventory does not seem daunting to move at an average monthly sales goal of 43,318 over the next 7 months especially in light of the high commitments that the industry appears to have on the books. But at what price? Remember that todays LHP price seems to be about $1.00/LB under prices this time last year! What is the true "shipment" plus "committed" total percentage of the industry? It feels like its over 75% but who knows? How will Chile lurking in the background affect how the California Walnut industry markets it remaining crop? Does Chile even matter if California has a high "shipped" plus "committed" percentage?
Let us also remember last year where you felt like you could not even get an offer and the crop seemed woefully short. Then the Walnut market imploded, inventory was plentiful and all the reasons for the rising market were thrown out the window. Many people in many countries were hurt by the implosion. Hopefully, In 30 days we will have another data point and a clearer picture of this interesting market dynamic.