In case you haven’t noticed, farmers in Northern California are pulling up walnut trees and replacing walnut orchards with other crops at an increasing and alarming rate. The reason they’re doing this is because the price growers are being paid for their walnuts is less than it costs to produce them. Growing crops for a loss isn’t a sustainable practice for farmers.
The reason growers are being paid so little for their walnuts isn’t as simple as the economics of supply and demand though. Instead, politics is playing as big (or perhaps even bigger) role as marketing, sales and consumer demand is.
In 2021, California walnut growers were barely breaking even when the price they received for the nuts was 71 cents per pound. Last year, walnut prices fell to 40 cents per pound. The 2023 price is going to be in the 40 to 50 cents per pound range. Farm cost inputs – labor, fertilizer, equipment, maintenance, you name it – have all increased over the last few years, which means right now that growing walnuts remains a money-losing endeavor.
It all goes back to 2018 when then-President Donald Trump decided the USA should fight trade wars with China, India, South Korea, Japan, Europe and Latin America. Trump imposed 25% tariffs on a variety of goods we import from China, our top trading partner, and imposed or raised our duties on products from the other countries.
As one would expect, all the countries retaliated. China for example placed 40-50% tariffs on its substantial U.S. tree nut imports, including walnuts, pistachios and pecans. Prior to this, China imposed a small 10% duty on U.S. tree nut exports.
The other nations also imposed high, double-digit tariffs. The result was a serious decline in demand for and sales of California-grown walnuts in the world because the tariffs raised prices prohibitively to consumers and to food industry users like bakers and food manufacturing companies.
Additionally, after the tariffs were imposed 5 years ago, China increased its domestic walnut-growing production significantly. Today it’s the number one walnut-growing nation in the world. Domestic demand exceeds supply though and if China removes the high retaliatory tariffs, California walnut exports could fill much of that void. The Chinese like California walnuts. Unfortunately, most of that excess demand is currently being filled by other countries like Chile, which has become the third-largest grower of walnuts in the world after the U.S. Nearly all walnuts grown in the U.S. come from California.
The reason the tariffs have been so devastating to the California walnut industry is because around 70% of the California crop is exported, with only about 30% sold domestically.
But this isn’t the only reason growers are being paid a non-sustainable price for their walnuts.
The Covid-19 pandemic in 2020 played a role too. Due to restrictions at ports, it was difficult to export agricultural products, including walnuts. In 2021, the price was 10 cents higher. But in 2022 growers received just 40 cents, 57% of the previous year’s price.
Supply – or what some say is oversupply – also is a key factor, particularly when taken hand-in-hand with the political reason – the retaliatory tariffs. California’s walnut production volume has increased by nearly 50% since 2015 and globally production is up 61% since 2015.
What’s abundantly clear though is that walnut growers can’t continue to receive prices for walnuts that are less than the cost of production. This is why growers are pulling up walnut trees. If it persists we’ll see this happening on a much larger scale. Some supply reduction in the form of orchard removal is okay but it’s preferable to increase sales rather than to reduce supply. In order to achieve the latter objective, to grow sales of California walnuts, here’s what we need to do.
First, there’s some good news for California growers this summer. In late June, India repealed its retaliatory tariff on U.S. Walnuts imposed in 2018-2019.
Demand for walnuts in India is huge and growing. India imports about 50% of their total consumption. It shifted much of that over the last 5 years to Chile because of the trade war with the U.S. Now that the retaliatory tariff against U.S. imports has been repealed, India will once again buy a significant volume of California walnuts because the Indian people like the quality of the nuts. The California harvest season – September to November – also is a plus for India.
The U.S. must now work with the other countries to get them to remove their retaliatory tariffs on our walnuts. This alone will grow California walnut sales astronomically and result in an increase in the price growers receive for their crops. Keep in mind that 70% of the California crop is exported. This is the reason why the retaliatory tariffs have been so devastating to California walnuts, which make up almost all of the walnuts grown in America.
Getting all retaliatory tariffs on U.S. agriculture goods removed is a top priority of the Biden Administration, according to the Secretary of Agriculture. Doing so is also a top priority of the California Walnut Commission.
In the longer term we need to significantly increase domestic demand for and sales of walnuts. The 70% – 30% split between exports and domestic sales is too disproportionate. This is why things like retaliatory tariffs can be so devastating. The industry is too reliant on exports.
The playbook for achieving this with California walnuts is what has been done since the 1980s with California almonds. Like has been achieved with almonds, the walnut industry needs to get more food companies to create food and beverage products using the nuts as the key ingredient; increase distribution and sales of walnuts in retail stores; and create more demand for walnuts among consumers, which will translate into higher sales.
The industry is making good strides in all the above but the efforts need to be more, better and stronger. One of the most immediate things that can be done is to get grocers to better display walnuts in their stores like they do with almonds. In the nerm term too, the industry needs to convince food companies to create more value-added, immediate-consumption snack products featuring walnuts.
Walnuts are one of the tastiest and healthiest foods on the planet. For example, they contain the omega-3 fatty acid alpha-linolenic acid (ALA) which is essential for good heart health. Walnuts are the only nut that contains ALA and one of the handful of plant-based foods that contain it.
Consumers in countries throughout Europe as well as in China and India have discovered the health benefits of walnuts more so to date than have Americans. But I’m seeing that changing in the U.S. and believe we’re on the cusp of a major growth spurt in walnut consumption. Walnuts have all the elements – good taste, convenience, health and wellness – needed to be huge when it comes to popularity and sales.
Increasing domestic sales is key in conjunction with solving the political mess created with the tariffs in 2018 to save California walnuts.
My prescription for saving California walnuts therefore is simple but of course not easy: Get the remaining tariffs eliminated and build back the foreign markets, while at the same time work smarter and harder to grow domestic demand and sales.
My Job Depends on Ag Magazine columnist and contributing editor Victor Martino is an agrifood industry consultant, entrepreneur and writer. One of his passions and current projects is working with farmers who want to develop their own branded food products. You can contact him at: victormartino415@gmail.com.
