In comparison, the carry-over for each of the past nine years has averaged less than 48,000 tons, reports industry consultant Pete Turner, Turner and Associates, Stockton, Calif. He is also chairman of the California Walnut Handler Coalition, which represents about 90 percent of the walnuts grown in California.

“About 80 percent of the roughly 40,000 tons of inventories on hand at the start of the 2014 marketing year were committed,” Turner says. “By contrast, more than 80 percent of the 83,000-plus tons of carry-over into the current marketing year were not committed.”

So, instead of working its way through slightly more than the 600,000 tons of walnuts growers harvested last fall, handlers and packers face the challenge of marketing and moving 660,000 or so tons before the 2016 harvest begins.

Chances of that, in Turner’s view, are slim to none.

“In fact, I wouldn’t be surprised if inventories at the end of the 2015 marketing year exceed 100,000 tons,” he says.

What’s more, based on new acreage expected to come into production this year, Turner sees the potential for a third straight year of record high production with the 2016 crop coming in at around 625,000 tons.

In the previous marketing year (September 1, 2014, through August 31, 2015), the industry shipped a total of 529,570 tons (inshell equivalent) of walnuts. For the first five months of the current marketing, shipments totaled 316,808 tons.
This exceeded shipments for the same period a year earlier by more than 37,000 tons.

However, because the industry started the current marketing year with about 60,000 more tons of uncommitted inventories than in September 2014, shipments to date are actually trailing the pace of a year ago,” Turner says. 

Typically, after delivering their walnuts to handlers at harvest, growers are paid for their crop in a series of installments as the nuts are sold. For instance, depending on the handler, a grower might receive payment for 30-40 percent of the crop delivered to the handler at harvest.

Then, the grower would get another payment for 25 percent of the crop in January and again in March before getting paid for the remaining unsold nuts in early June.

As a result, growers don’t know the actual price of their crop until the final payment. For the 2014 crop, growers received an average price of around $1.75 per pound (inshell). 

Prospects for this year’s crop prices are much dimmer, Turner notes.

“With a good meat yield and high quality, some growers may receive around $1 a pound,” he says. “But, we’ll probably be seeing a lot of grower payments of 50 cents a pound, if not less.

That’s getting dangerously close to or below the cost of production for many growers.”

Returns for some growers from their 2015 crop suffered from high mold levels caused by rains midway through harvest.

For example, Turner says yields for Chandlers harvested earlier on were in the 47 percent range. However, following the rains and onset of mold damage, Chandler yields fell below 45 percent.

“Since walnuts are purchased for their meats and not the shells, lower meat yields mean lower returns to the grower,” he says.

Declining prices have added to the industry’s financial pains in another way.

For instance, after opening on Sept. 7 at $3.50 per pound for Chandler light halves and pieces, the export price dropped on a weekly basis to less than $2.60 in mid-February. This created a formula for contract defaults as buyers were rejecting loads for any reason in order to re-negotiate with the sellers for lower pricing.

Many buyers just walked away from the contracts altogether, Turner notes. If a deal falls through, the seller pays for return of the unsold nuts.

“The number of contract defaults this year is the highest I’ve seen in a long time,” Turner says.