With more California walnut orchards being removed, the outlook for the industry is expected to improve as growers try to balance supply and demand.
But such efforts alone will not be enough to put them on a fast track to market recovery and profitability, analysts suggest.
A new report by RaboResearch Food and Agribusiness says walnut production may not decline as fast as acreage because growers are taking out older, less-productive trees and so-called “heritage” varieties that are also lower yielding. Growers are also removing orchards with poor water availability or soil quality. What’s left are orchards that have higher-density plantings and improved cultivars, with yields expected to surpass historical averages.
“The remaining acreage is going to be more productive,” said David Magaña, a senior analyst with RaboResearch and one of the authors of the report.
Until recently, walnut bearing acreage in California has been on a steady climb, reaching a peak of 400,000 in 2022 before dropping to more than 382,000 in 2023. For now, acreage appears to have stabilized, Magaña said, with trees being removed as others come into production.
“Things are starting to turn around from 2022,” when growers faced elevated production costs, a lower-quality crop and historically low prices, Magaña said. Thanks to “exceptional quality” nuts in 2023, prices have started to rebound, he said, though not as much as growers would like, largely due to the record size of the crop and the difficulty of moving such volumes.
Magaña said he expects production will return to more normal levels in the next few years, weather permitting, with more trees being pulled. This will allow the industry to be “in a more favorable supply-demand balance,” though prices will probably remain below break even for most growers, he added.
The slowing production trend is happening not just in California but in other major walnut-producing regions such as Chile and China, RaboResearch reported. Globally, walnut supplies are expected to be stable or declining in the next few years, Magaña said.
In Chile, where walnut plantings have been increasing for the past two decades, growers have started to cut acreage after years of declining prices and impacts from adverse weather, which reduced this year’s crop by 30% after record volumes last year.
China, the world’s largest producer and consumer of walnuts, also is not expected to increase production in the next few years, Magaña said. Once a net importer of walnuts, China has become a net exporter in recent years, changing the dynamics of the industry, he added.
Even so, Magaña said he expects the U.S. and Chile will maintain a competitive advantage over China because of their reputation for high-quality nuts, especially with ongoing efforts by the California walnut sector to increase demand and consumption.
“That is going to help support prices and profitability in years to come,” Magaña said.
He said he considers Chile to be a “friendly competitor” of California due to its counter-seasonal production in the Southern Hemisphere. With its product commanding a premium, Chile could potentially create more demand for walnuts by helping to provide consistent, year-round supplies of the tree nut, Magaña added.
He noted how other agricultural sectors such as avocados and blueberries have grown consumption due to wider product availability. With Chilean supplies in key markets such as Europe and Asia, there is opportunity “to change consumer perception that walnuts are mostly a seasonal item and mostly a baking ingredient,” Magaña said.
He stressed the importance of not just promoting walnut consumption but how it is eaten. Diversifying walnut consumption to snacking, in food-service channels and in manufactured products will help the industry absorb larger volumes, he said.
Increasing export demand also remains critical, Magaña said. With India’s expanding middle class and its substantial vegetarian population, he said he thinks walnut exporters are “just scratching the surface” in the southeast Asian market, noting India has already become the main destination for California almonds.
But India has its own walnut production, which the Indian government protects via hefty tariffs on all walnut imports. Chile has been working to remove those tariffs for its nuts. While the U.S. successfully got India to remove the Trump-era retaliatory tariffs last year, all imported walnuts still face 100% tariffs. If they can be lifted, “then India will be way more attractive as an export destination,” Magaña said.
Looking at state production, Brian Fedora, a Sutter County walnut grower and processor, said he has seen Sacramento Valley growers move away from higher-density plantings, which allow growers in the early years of an orchard achieve higher yields more quickly when young trees begin to produce.
But the hedgerow-style plantings tend to choke each other out once the trees become bigger, he said, with yields falling or trees not producing as much as expected in the long term. Planting twice as many trees to the acre also gets costly, he said.
“Then it didn’t look like the economics were panning out quite like what the model stated,” Fedora said.
Regardless of planting density, Fedora said with the development of new rootstocks for different soil types and the way farmers use fertilizers, amendments and spacing, the science of growing walnuts has become so advanced that “we’re getting better production than we’ve ever gotten.”
Now that older varieties such as Serr, Payne and Vina have fallen out of favor and are being pushed out, three varieties have come to dominate California walnut orchards: Chandler, Howard and Tulare. There are a few newer varieties, Fedora said, but they’re largely unproven.
San Joaquin County grower Josh Barton, whose family also processes and markets walnuts, said questions remain about the harvestability, yield, color and kernel size of the newer varieties. But “people have their eyes” on a couple of them, including Ivanhoe and Wolfskill, which his farm has planted recently to diversify its portfolio.
“Being reliant on just three varieties is not great for the industry,” he said.
But it will take time to prove the sustainability of the new varieties and whether they will be accepted globally, he acknowledged. Color remains the “driving force of marketability,” Barton said, but early harvest timing is also important to growers because the later the harvest, the greater risk of inclement weather wrecking the crop.
“If you can get something off earlier than a Chandler and it’s going to be light in color like a Chandler, then you’ve hit the lottery,” he said.
Though analysts and people in the walnut business largely agree the industry is starting to rebound from significant challenges during the past few years, Barton said signs point to a slow, incremental recovery, which means “we’ve still got a long way to go.” Moving forward, he said he hopes growers take a cautious and healthy approach so that they don’t overplant again and “shoot ourselves in the foot.”
“We have got to be smart about how we incrementally grow and build this industry back up,” Barton said.
(Ching Lee is an assistant editor of Ag Alert. She may be contacted at [email protected].)