California nut producers struggle to reach overseas markets
By Kim Chipman and Augusta Saraiva (Bloomberg) –
As summer approaches the end of the holiday season, California’s billion-dollar nut industry is preparing for its busiest shipping season. The problem is getting the nut out of the door.
Farmers kicked off the new marketing year Thursday with a massive backlog of produce as they prepare to harvest what could be a bumper crop. The state, which grows about 30% of the world’s walnuts, makes up nearly all of the United States’ production.
The dilemma stems from supply chain bottlenecks that have curtailed foreign and domestic shipments, costing California producers an estimated $1.3 billion in lost wholesale value this year alone. Logistical problems, including massive congestion on container ships in the California port of Oakland, threaten to give export competitors such as Chile and China a competitive advantage. The industry also had to deal with angry customers and lower prices.
“It’s a classic supply problem,” said Don Barton, president of GoldRiver Orchards, a nut grower and manufacturer in the Central Valley, an area that produces 40 percent of America’s nuts and fruit.
The threat of more wood jams prompted Barton to try something new: send produce by rail from California to Virginia, where the nuts are loaded onto ships for destinations like Europe and Israel.
“The cost is higher but we have to do what we have to do to get our crop moving,” Barton said.
According to Barton, “chaos” in the port of Auckland, as well as a strong dollar affecting the attractiveness of global commodities priced in US currency, are among the causes of the glut. He said wholesale export prices for Chandler walnuts — the leading California-grown variety — have fallen to 80 cents a pound from $1.25 a year ago.
California is the world’s largest nut shipping company and the second largest nut grower after China. A third of the US crop is consumed domestically and the rest is exported, with major importers including Germany, Turkey, Japan and South Korea. Shipping crises started taking a heavy toll last year, adding to the pressure.
“Between the trade wars, Covid, and port issues, the industry has lost $3 billion over the past five years when you put it all together,” said Pamela Grafitt, senior director of international marketing for the California Nut Commission.
Walnuts, the oldest food known to man and prized for their healthy omega-3 fatty acids, have a shelf life of 12 to 18 months, depending on how the nuts are stored. This makes them more difficult to store than nuts like almonds, which can keep fit for more than two years.
Delays on container ships have resulted in some products remaining on hot ships for extended periods and spoiling before reaching customers. Graviet said the overdue walnuts are best used as bird food.
US producers will soon be heading into their busiest export period as the demand for walnuts is soaring around the world such as Diwali, Christmas and Ramadan. According to Graviet, last season’s shipping crises led to sales of walnuts worth 70,000 tons, or about 10% of the crop.
“Walnuts are part of all these holiday traditions,” she said. “With not being able to get our product out, we lost those windows.”
It’s not just a nut. Almonds – California’s second-highest agricultural commodity after dairy – have been hit hard by busy shipping routes. Nut exporters and other agricultural shipping companies in the state are in talks with major steam ships and rail carriers about a new trade route to bypass Auckland and move their produce abroad faster.
“We have more than two billion pounds of almonds in warehouses because they can’t get to their markets overseas,” said Jane Siroca, CEO of the Port of Los Angeles, the largest trade portal for the United States. He pointed to the decline in agricultural exports from Southern California for at least three years.
Oakland, California’s busiest port after Los Angeles and Long Beach, has faced problems ranging from capacity to employment during the pandemic. In July, the center was closed for nearly a week after truck drivers protesting a temporary labor law that could take 70,000 California drivers off the road blocked access to the operation.
California nut production this year is expected to reach 720,000 tons, down 1% from 2021, according to an updated estimate Thursday from the U.S. Department of Agriculture. If this crop materializes, it will be the third largest in the state since at least 2003. Farmers initially benefited from torrential rain late last year but then the orchards were disrupted by hot, dry conditions amid the worst drought in 1,200 years.
Barton is among the farmers across the Central Valley whose surface water allocation has been reduced. While his walnut trees have been able to provide sufficient groundwater, he is concerned about the industry’s outlook next year if the state does not get some much-needed rain and snow.
The water restrictions, he said, are “a shot over the arc about what will happen if this drought is not broken.”
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