Chile Walnuts: Higher Yields, India Demand and Firm Kernel Prices

Chile’s walnut market is entering MY2026/27 with slightly higher output and a clear pivot toward India, while El Niño weather risk and softer demand in Europe keep a lid on outright price rallies. Strong yield gains and better water availability are expected to push Chilean walnut production and exports about 3% higher, even as orchard area continues to contract. Trade flows are being reshaped: India is rapidly gaining weight as a destination, offsetting a sharp drop in shipments to Germany. Firm to slightly higher kernel prices in China and for organic origins underline a market that is better balanced than in earlier surplus years, but still sensitive to weather and demand swings.

Prices

FOB quotations for walnut kernels have edged higher in recent days, reflecting tighter nearby supply and improving demand ahead of the Northern Hemisphere marketing season:

This broad-based, modest increase across Chinese and organic origins points to a firmer undertone as buyers position for new-crop supplies from both Chile and the Northern Hemisphere.

Supply & Demand

Chile’s walnut production in MY2026/27 is forecast around 170,000 tonnes, up 3% from 165,000 tonnes a year earlier, despite a 3.5% decline in planted area to about 40,323 hectares. Higher yields and better water availability after winter rains are expected to compensate for the ongoing structural reduction in orchard area.

Exports are projected near 165,000 tonnes, also rising around 3%. India has emerged as the standout growth market: shipments in January–July surged 91.6% to 15,717 tonnes, helping to offset weaker demand from traditional European buyers, with exports to Germany down by roughly half over the same period. This marks a clear reorientation of Chilean walnut trade flows toward price-sensitive, fast-growing consumer markets.

Domestic consumption in Chile remains small relative to production, so export performance will continue to dominate price formation. Parallel growth in Chilean almond output and exports adds to the country’s role as a diversified tree-nut supplier, but walnuts remain the volume driver.

Fundamentals & External Drivers

The key fundamental driver for Chile is the yield story: improved irrigation conditions and orchard management are raising output per hectare even as total area contracts. This efficiency gain underpins the moderate production growth outlook and supports competitive FOB offers into India and other Asian markets.

On the demand side, India’s rapidly expanding import appetite for in-shell and kernel walnuts is reshaping global trade patterns. Stronger Indian buying interest is visible not only in Chilean export data but also in elevated wholesale prices on domestic Indian markets, while some European destinations show price resistance and substitution toward other nuts.

Weather remains the main risk factor. A pronounced El Niño pattern raises the likelihood of heavy rain, frost and disease pressure around flowering in September–October, which could affect nut set and quality. In California, where harvest typically runs from early September into November, current forecasts point to relatively mild, occasionally showery conditions in the Central Valley, supportive of steady harvest progress but with localized delays possible if rainfall events cluster.

Outlook & Trading Strategy

With Chilean production and exports both set to rise around 3% and demand in India gaining momentum, the global walnut market appears more balanced than in previous oversupply years. However, El Niño-related weather risks and uneven regional demand keep uncertainty elevated.

• Importers in India and the Middle East: Consider layering in purchases for Q4 2026–Q1 2027 while FOB prices for Chinese kernels and Chilean new-crop indications remain only moderately higher; prioritize reliable quality and timely shipment windows.
• European buyers: With Germany-bound Chilean shipments sharply lower, maintain flexible coverage, as any weather-related downgrade to Chile’s crop or logistical bottlenecks in California could tighten premium kernel grades.
• Producers and exporters in Chile: Use current firmness in kernel prices and strong Indian demand to lock in forward sales on a portion of expected output, while keeping some volume unpriced to capture potential upside if El Niño materially curbs effective supply.

Over the next three trading days, walnut kernel prices are expected to remain firm to slightly higher on FOB Dalian for Chinese kernels and broadly steady to firm for organic kernels from India and the US, with buyers closely watching Chilean flowering weather and early Northern Hemisphere harvest quality.