Walnut business readies to handle, sell larger crops
To prepare for a greater supply of walnuts in coming years, people in the walnut business say they are investing in infrastructure and marketing to sustain future production and grow demand for the crop.
Walnut grower and processor Mike Andersen of Andersen & Sons Shelling in Vina, which processed more than 70 million pounds of shelled and in-shell walnuts last year, said the walnut sector needs to invest in infrastructure such as cold storage. Andersen, who sells conventional and organic walnuts, has updated the company’s shelling facility to comply with new federal Food Safety Modernization Act requirements, and has separate storage rooms for improved traceability. Other updates include modernized equipment to increase efficiency and reduce employment costs.
“We put a big emphasis on the future. With the larger crops coming, we have to create more storage, and that’s a big capital expenditure,” said Andersen, who is constructing a second, 18,000 square-foot coldstorage facility for walnuts. “The problem with walnuts is we receive every single pound during a 45-day period, and then have to sit on them for up to 12 months.”
California growers have added 70,000 bearing acres of walnuts in the last 10 years. From about 365,000 acres, growers harvested about 615,000 tons of walnuts in 2017, slightly less than what was projected, according to the U.S. Department of Agriculture.
“As we look to the future, we know that we have more product coming. We’re excited about the potential and of course, having more product to sell, we need to have more homes for that product,” said Michelle Mcneil Connelly, chief executive officer of the California Walnut Commission.
Connelly said the commission has increased investments in marketing, including a new logo, web design and advertising campaign to boost demand for California walnuts.
“We wanted to have a new logo that the consumer recognizes and hopefully will see at the point of purchase,” Connelly said. “We tested the logo with consumers and the key takeaway is it adds value and makes customers want to purchase walnuts.”
Close to 65 percent of the state’s walnuts are exported. The top export markets consist of Germany, Turkey and China. Though there has always been a big push to increase exports, Connelly said, more work can be done in the domestic market.
“We really wanted to focus on how we can build additional volume through the domestic channels. Our household penetration rate is low; we have a lot of upside opportunity,” she said.
For domestic customers and industrial and food service users, the commission plans to showcase the versatility of walnuts and work on new product development, with Connelly pointing to potential in several segments of the market.
“We’re doing some special work with the chocolate sector and confections, and also spreads and sauces. We’re trying to get people to think about walnuts in new and unique ways,” she said.
Andersen and others said they believe these efforts by the commission will increase demand for California walnuts, especially as people seek them out to take advantage of health benefits.
“The domestic market is the largest shelled market in the world,” Andersen said. “You have people who are snacking on walnuts for their health, and the younger generation simply wants a high-protein, healthy snack.”
As the commission works to increase markets for walnuts, growers said they hope the investments will lead to improved prices. For the 2017 crop, the grower price was about $1.30 per pound, a 30 percent increase from the previous year, Andersen said, but down from record prices paid during 201214.
Yolo County walnut grower Ryan Lang, who sells walnuts to Andersen, said some who choose to sell walnuts quickly during harvest and accept a price that is lower than market value negatively affect the price for others selling throughout the year.
“This does affect the market and is what’s been keeping the sustained downward pressure on the walnut price,” Lang said. “They are underselling it.”
Shermain Hardesty, extension economist in the Department of Agricultural and Resource Economics at the University of California, Davis, said spreading sales during the year “was the traditional marketing practice, so you can spread your risk. It improves price stability for growers in particular.”
“The strategy has always been to have a level sales volume, but of course shortly after harvest they are shipping out products. At that point, there is a big surge (in sales), but there is still a considerable amount of volume left to sell,” Hardesty said.
Sutter County walnut grower Brian Fedora, who operates a custom harvesting, hulling and drying operation, said, “Walnut growers are price takers, like most of agriculture, letting the chips fall where they may. It’s all who you know, it is all where you market your product, and not locking yourself up in a long-term contract.”
When the walnut price spiked to $1.80 a pound in 2013, Fedora said, it was due to an improving world economy, the opening of new markets and increased demand.
“It was a perfect storm and prices went crazy,” he said. “Once prices came back down to earth, people started scrambling. Handlers were trying to survive, and therefore we saw some fluctuation in prices.”
At the California Walnut Commission, Connelly said, the mission is “to increase demand for walnuts and if we increase demand for walnuts, we sell more walnuts and that results, in theory, in higher grower returns. We are trying to continue to grow new markets and new segments.
“If we are successful at doing that, it will result ultimately in a higher grower return, and that is good for everybody,” she said.