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Walnut Situation and Outlook in Selected Countries

GLOBAL PRODUCTION & TRADE 

World production of walnuts is expected to reach almost 727,000 tons in 2002/03, up 3 percent from the previous year.  China produces approximately 44 percent of all commercial walnuts worldwide, but is responsible for only 14 percent of world exports.  The United States is the world’s second-largest producer and the world’s largest exporter of walnuts.  World exports are forecast in 183,059 tons in 2002/03, up approximately 9,000 tons from 2001/02. 

The top four producers in 2002/03 are China (320,000 tons), the United States (249,480 tons), Turkey (68,000 tons), and India (32,000 tons).  Other key producers include Chile, France and Italy. 

GLOBAL POLICY 

As part of China’s agricultural restructuring, China’s State Forestry Administration introduced a pilot program called Cropland Conversion to Forest and Grassland.  During 2000, the first year for the program, a total of 683,600 hectares were converted.  The program provides cash, grain, and seedling subsidies and farmers cannot grow other crops.  The program allows a maximum of 20 percent of the converted area to be for economic trees (e.g., walnuts, pecans, and other nut or fruit bearing trees).   Several specialists in key production regions believe that walnuts will be the trees of choice in the conversion.  In some areas, walnut seedlings could comprise 5 to 10 percent of the total converted area.  Walnut and other nut bearing trees are considered a more attractive alternative because they require less management and nuts can be stored and distributed easily with little damage.  Farmers, specialists, and government officials view walnut production as an ecological and economic alternative to cropland agriculture.  In general, the program has been well received, but there have been a few operational difficulties, including management. 

The EU has a fruit and vegetable (F&V) regime in place that is based on POs that are formed voluntarily by groups of growers and cooperatives.  However, less than half of all Spanish fruit and vegetable production is under POs.  Only the larger POs that are able to set-up operational funds are eligible to receive EU support.  The Mid Term Review (MTR) of the Common Agricultural Policy (CAP), as currently proposed by the EU Commission, includes a new support scheme for tree nuts to replace the temporary tree nut improvement 10-year program, which ended in June 2002.  However, growers claim that the subsidy rate of 100 euros/ha is insufficient, given current increased production costs and depressed market prices.   Member countries would have the option of supplementing this payment with up to an additional 109 euros/ha, but even the maximum payment (209 euros/ha) is lower than what they were getting from the tree nut improvement program (a minimum of 242.6 euros/ha). 

UNITED STATES 

Production

California's 2002/03 walnut production is forecast at 249,480 metric tons, down 10 percent from last year's record crop.  The 2002 Walnut Survey utilized a total of 679 blocks with two sample trees per block.  Survey data indicated an average nut set of 1,572, down 9 percent from the 2001 average of 1,719.  The Hartley nut set was down 4 percent; Chandler, was down 24 percent; Serr, was down 6 percent; and Franquette was up 14 percent from 2001.  The percent of sound kernels in-shell was 96.3 statewide. In-shell weight per nut was 22.0 grams, while the average in-shell suture measurement was 32.4 millimeters.  The average length in-shell was 38.5 millimeters.  The forecast is based on 196,000 bearing acres.  The decrease in U.S. production of walnuts forecast for 2002/03 is not expected to increase grower prices.  As a result, U.S. exports of walnuts to the world are expected to decrease slightly from the previous year.  The walnut crop got off to a great start this year, as weather conditions were nearly ideal during the critical bloom and pollination period. However, an early-March freeze in the Sacramento Valley caused damage to trees in several counties. 

Trade

In 2002/03, U.S. walnut exports are forecast at 105,559 tons, down slightly from the previous year.  A decrease in U.S. walnut production and higher walnut prices are expected to hamper exports.  In 2001/02, in-shell walnuts accounted for approximately 67 percent of total U.S. walnut exports.  Major buyers of U.S. in-shell walnuts were the EU (primarily Spain, Italy, and Germany) accounting for 69 percent and Asia (primarily Japan and China) purchasing 17 percent.  Asia is the most significant importer of shelled walnuts, purchasing 31 percent of total U.S. shelled exports in 2001/02. 

CHINA 

Production

In 2002/03, walnut production in China is expected to reach 320,000 tons, up 15 percent from the previous year.  Early estimates are that 2002/03 production will surpass that of the previous two years as more bearing acreage planted in the 1990s becomes commercially viable.  Improvements in tree nut management should also result in production increases.  In addition, favorable weather during the 2002/03 blossom period for walnut trees is another indication that production should increase.  Walnut production in 2001/02 was lower than expected due to complications brought on by late frosts during bloom in parts of western China and high elevation areas in southern China.  It was reported that in 2001/02, some in-husk walnuts dropped prematurely and all walnut production in some key production bases was lost.  

Older walnut producing areas are scattered throughout China and are mainly Persian variety walnuts. Walnut production should start growing because planting acreage is expanding and planting density is increasing.  Over the last several years, black walnut varieties from the United States have been planted successfully in south China.  Black walnut varieties in south China are often grafted to help the seedlings adapt better to the terrain and weather conditions.  Specialists in western China have conducted trial planting and grafting of black walnuts, but they will not make any recommendations until they determine how the varieties will withstand harsh weather conditions.

Consumption

Chinese consumers prefer in-shell nuts that can be cracked by hand.  They are considered to be cleaner and they are cheaper than processed nuts.  Walnut demand is often highest during the Chinese lunar New Year in late winter or early spring.  Walnut demand is also high during China’s mid-Autumn festival in late September.  Walnut demand during the mid-Autumn festival is met with fresh walnuts supplied by domestic growers as opposed to imported nuts. 

The Chinese consider walnuts to be a health food, which is good for the brain, hair, and kidneys.  While walnuts are mostly consumed fresh or dried, they are also consumed as a processed snack food.  Processed walnuts are coated in honey or sugar and sesame seeds.  Use of dried walnuts in the baking and confectionary industry is growing; it is increasingly common to see walnuts baked into breads, rolls, cookies, and cakes.  Walnuts are also ground into powders for porridge or processed into a milk-like product.  In some rural places, walnuts are also crushed for oil. 

Packaged walnut consumption seems to be higher in large cities including Beijing, Shanghai and Guangzhou.  Consumers in other large cities, such as provincial capitals and coastal cities, also tend to have a higher purchasing power for processed and packaged nuts.  According to processors and traders, bulk bin walnut sales in large inland cities and provincial county seats surpass sales of packaged nuts. 

Trade

China’s walnut exports in 2002/03 are forecast at 25,000 tons, up forty-seven percent from the previous year. This increase is attributed to the large increase in walnut production and an increase in area harvested.  Exports were down in 2001/02 for a number of reasons.  Lower production and increased domestic demand eroded China’s price competitiveness.  Chinese industry sources believe that China’s walnut exports will depend on its ability to produce highly processed and high value walnut products.  These products will most likely be targeted at markets in Asia and Europe because the price will be too high for most domestic consumers.  Chinese traders say that eastern European countries are supplying a greater share of nut exports to Europe.  Meanwhile, India appears to be increasing its market share in Australia.  The result is that China’s tree nuts are losing ground on the international market.  Some Chinese trading companies feel that international walnut consumption is growing by around 1 percent a year.  These companies do not want to be excluded from what is considered a stable, growing market. 

China’s walnut imports are expected to drop from 900 tons in 2001/02 to 500 tons in 2002/03.  Lower domestic production and rising domestic demand in 2001/02 helped increase imports over the last marketing year.  In addition, rising international demand for shelled and processed walnuts helped increase China’s imports for processing walnuts that were later re-exported to other countries. Demand for in-shell walnuts has grown over the last year, is in large part due to increased processing capacity by existing processors in south China that re-export packaged in-shell nuts, shelled nuts, and seasoned nuts to other countries.  Processing operations prefer U.S. or third-country nuts for three reasons:  1) nut size is more uniform than most Chinese walnuts thereby making walnut cracking or shelling much easier; 2) the quality is often more uniform; and 3) in coastal cities it continues to be easier to order a shipment of U.S. or third-country walnuts for delivery than to coordinate delivery from several domestic growers and suppliers from inland China. 

TURKEY 

Production

According to official statistics, the number of bearing and nonbearing trees has been increasing slowly.  Based on this trend and the shift to better varieties, sources forecast steadily increasing production as earlier planted trees reach bearing age and more trees are planted.  Although official estimates place production at around 120,000 tons (in-shell basis at a conversion factor of 1:2.5), most private sources believe that production is only about 68,000 tons.  Some international estimates report even lower figures.  The lack of a systematic crop survey and widely divergent estimates make it difficult to accurately estimate the crop. 

Walnuts grow throughout most of Turkey.  In the past, they generally were not cultivated but simply harvested from natural forests.  However, during the past two decades, increased demand (and prices) have made walnut cultivation more attractive encouraging greater investment in the sector.  The Horticultural Research Institute (HRI) in Yalova is the leading walnut research facility in Turkey and has developed nine standard varieties with higher yields.  Thus far, only a few of these improved varieties have been planted commercially.  In addition to the HRI, several private companies have begun commercial propagation of improved walnut varieties. 

Consumption

Per capita consumption appears relatively stable, with long-term increases in aggregate consumption resulting from increases in population.  About 50 percent of the crop is used for home consumption and the remainder is marketed commercially.  Most of the commercially marketed walnuts are consumed directly with very little processed.  The retail price for shelled walnuts in Ankara currently is about TL 15,000,000 per kilogram, compared to TL 8,000,000 a year ago.  MY 2000/01 and MY 2001/02 consumption estimates were slightly decreased because of the economic crisis, which led to decreased imports and lower supplies.  

FRANCE 

Production

France is the leading European producer of walnuts, with roughly 25 percent of total European production.  In 2002/03, French walnut production is expected to be higher than in 2001/02 at 30,000 tons, although some hailstorms affected the walnut orchards in the Isère region in mid-July 2002.

French walnut production for 2000/01 and 2001/02 were respectively revised to 28,660 tons and 27,810 tons, in line with recent estimates by the Office of Statistics of the French Ministry of Agriculture and Fisheries. 

Walnut production includes roughly 2,000 tons of in-shell fresh walnuts sold in September and October, 7,000-8,000 tons of in-shell dried walnuts, and 11,000-12,000 tons of shelled walnuts.  Shelled walnuts are used either for industrial food processing (60 percent), craft food processing (30 percent), or sold as such (10 percent). 

Consumption

Walnuts are consumed as such for snacking or home cooking, or in by-products, such as walnut oil, or shelled walnuts used as ingredients in the pastry, bakery and cheese industries.  French households are estimated to purchase approximately 7,000-9,000 tons of in-shelled walnuts (including 2,000 tons of fresh walnuts and 7,000 tons of dried walnuts), and 6,000 tons shelled walnuts per year.  Most of the French southeastern production (roughly 75 percent) is for the in-shell walnut market, while more than half of the southwestern production goes to the shelled walnut market segment.  Overall, large grades are for the in-shell walnut market, while smaller grades are for the shelled walnut market.  The French per capita consumption of walnuts is 150 grams of in-shell walnuts and 200 grams of shelled walnuts per year.   In-shell walnuts are mainly consumed during the late fall and in winter.  However, there is no seasonality for shelled walnut consumption.  

Trade

Exports in 2002/03 are forecast at 23,000 tons, up slightly from the previous year.  France is a net exporter of walnuts, principally to EU member states and Switzerland.  French and U.S. walnuts compete for these markets.  During the first 8 months of MY 2001/02 (October-May), French exports of walnuts declined by 6 percent to 18,720 tons compared to the same period of MY 2000/01, due mainly to reduced shipments to Germany and Spain, which are France’s leading export markets.  However, French exports to Italy and Switzerland increased significantly during the same period.  The decline in overall French exports resulted principally from the stiff price-competition with U.S. walnuts on European markets.  In 2001/02, as U.S. walnuts were sold at significantly lower prices than French walnuts in Europe, prices for French walnuts declined and were lower than in 2000/01.  In 2002/03, the currently low U.S. dollar relative to the euro is expected to be beneficial for U.S. products on the European market. 

INDIA 

Production

India’s 2002/03 walnut production is forecast to increase by 10 percent to 32,000 tons, due to the higher yielding phase of the trees’ alternating bearing pattern and favorable weather conditions during flowering and fruiting (March/April).  However, production prospects have been tempered by dry conditions during June/July resulting in shrinkage in the nut size and shriveling.  Market sources expect the nut size to be down by 5-10 percent compared to that from the previous year (nut size varies from 24-32 mm).  There are no reports of any pest or disease attacks.  Arrivals are expected to be timely from early September through December, peaking in late October.  Assuming normal weather, the 2003/04 walnut crop is forecast lower at 30,000 tons due to the low yielding phase of the alternating bearing pattern.  Indian walnuts are grown almost entirely (98 percent) in Jammu and Kashmir under rain fed conditions in rocky terrain.  Stagnant grower prices and continued violence in the traditional producing areas of Kashmir have discouraged additional plantings.  Yields are low due to the lack of irrigation and low fertility, ranging from 18-50 kilograms per tree per year.  Indian walnuts are classified as hard, medium or thin shell (Kaghazi).  The average shelling rate is 40 percent, but can go as high as 70 percent in the case of the thin-shelled Bakshi variety. 

Consumption

Strong export demand and tight supplies are expected to limit domestic consumption of walnuts to 16,000 tons in 2002/03.  Comparatively low prices for almonds in the last few years have encouraged middle class consumers and some institutional users to shift from walnuts to almonds during the fall festival season.  Walnut usage by the confectionary and ice cream industry is expected to continue to increase, however, as prices are still competitive with other nuts, such as cashew nuts and pistachios. Around 2 percent of walnuts (normally rancid nuts) are used for oil extraction to be utilized by soap and cosmetic manufacturers.  Walnut consumption will remain stagnant in 2003/04 at 16,000 tons owing to lower domestic supplies. 

Due to larger than anticipated exports, 2001/02 consumption has been lowered to 15,000 tons.  Growers and wholesalers are currently holding a major portion of the 2001/02 ending stocks.  Supported by a strong resurgence in export demand, domestic walnut prices were very firm in 2001/02.  Due to comfortable domestic supplies, 2002/03 prices are expected to remain at last year’s level.

Trade

Although walnut exports depend largely on domestic prices and export demand, exports in 2002/03 are expected to increase to 17,000 tons on improved domestic supplies and drop to 15,000 tons in 2003/04 on forecast lower production.  Exports during MY 2001/02 reached 16,000 tons on strong demand from the EU and improved export competitiveness due to the decline in the value of the Indian rupee.  The value of the Indian rupee compared to the U.S. dollar declined by 9-10 percent during 2001/02.  Major export destinations during the Indian fiscal years 2000 and 2001 were Spain, Germany, France, the United Kingdom, Greece, Egypt, the Netherlands, Denmark and Italy.  Most walnuts are exported from October through March.  More than 95 percent are exported as kernels (40 percent light halves; 20 percent amber halves/broken; and the balance as broken).  

There are no restrictions on walnut exports, and no export subsidies are provided.  Imports of walnuts, and most other dry fruits and nuts, are allowed without restriction under the Open General License (OGL), subject to an effective import duty of 40.4 percent.  Given the high tariffs and strong domestic production, opportunities for imports are negligible. 

ITALY 

Production

Italy’s walnut production in 2002/03 is forecast at 15,000 tons, or 15 percent more than last year’s crop, relatively poor in terms of both volume and quality.  Weather developments have been fairly good in Campania, the leading producing region of the local Sorrento variety.  The quality of the 2002/03 crop is anticipated to be very good, particularly with reference to the average nut size.  Planted area remains marginal and is not expected to expand in the near future, with the only limited exception of some newly-planted walnut orchards in northern Italy. 

Consumption

Walnut consumption (mainly in-shell) is traditionally concentrated during the Christmas season, but in the most recent years has expanded through the spring.  On the other hand, sales of shelled walnuts, consumed either as snacks or as ingredients for the confectionary industry, have increased sharply in recent years. 

Trade

The relatively low domestic crop in 2001/02 favored large imports throughout the year, with an expected final volume of about 18,500 tons, 28 percent more than in the previous year.  The major supplier was California (about 75 percent of total in-shell imports in 2001/02), followed by France (17 percent), and other minor suppliers.  Total imports, however, are expected to decline marginally in 2002/03, consequent to the good domestic crop, but should remain on the high side, thanks to the excellent consumers’ acceptance of California nuts.  Imports of shelled walnuts are expanding, in line with increasing consumption; however in 20001/02, the United States was only a marginal supplier, mainly due to the high prices of the California product, combined with the strong U.S. dollar.  The weakened U.S. dollar (currently it fluctuates around the parity with the euro) could of course favor California exports of both in-shell and shelled walnuts in 2002/03.  The EU customs duty for in-shell walnuts is fixed at 4 percent, while that for shelled walnuts is set at 5.1 percent.  The EU export refund for shipments to third countries is currently 66 euro/per ton for in-shell walnuts.

CHILE 

Production

Chile’s walnut production in 2002/03 is expected to reach 12,500 tons, up slightly from the year before.  An expansion in production is expected as most producers will continue replacing aging orchards with improved varieties, increasing grafting of their lowest‑yielding trees, and expanding planted areas.  Although walnuts are planted from the Third Region (Copiapo) down to the Ninth Region (Temuco), 1,500 kilometers to the south, over 90 percent are planted in the central areas, specifically Region Five (San Felipe‑Los Andes), the Metropolitan Region (Santiago) and the Region Six (Rancagua).  Industry sources indicate that after many years of a steady decrease in total planted area due to the uprooting of orchards near urban areas for housing and commercial development, newly planted area is now exceeding the area being uprooted.  The two main factors for the overall increase in planted area are a continuous deterioration of the profitability of alternative fruit crops, and relatively good prices obtained by walnut producers.  As a result, production is expected to increase in six to seven years to over 15,000 metric tons. 

 Consumption

As with most Chilean produce, domestic walnut consumption is a residual of the export market.  If international prices are low, exports fall off and domestic consumption increases as the larger supply drives domestic prices down.  However, domestic demand does not drive consumption or determine market prices.

 Trade

In 2002/03, exports are forecast at 11,000 tons, up 500 tons from the previous year as a result of production changes.  Increased exports are expected in the coming years, which will reflect the expansion in production and better quality once improved orchards begin to bear fruit.  The industry expects exports to fall slightly in CY 2002 due to economic instability in Argentina, Chile’s second largest export market.  Chile has a small but slowly-growing import market as a result of increasing demand, mainly coming from the United States, for higher-quality fruit. 

The FAS Attaché Report search engine contains reports on Tree Nut Competition or Market Intelligence for 16 countries including Chile, China, France, India, Italy and Turkey.  For more information on production and trade, contact Erik Hansen at 202-720-0875.  For information on marketing, contact Ingrid Mohn at 202-720-5330.  Also please visit the tree nuts web page at:

http://www.fas.usda.gov/htp/horticulture/nuts.html for further information.