LINCOLN, CALIF. (RFD NEWS) — Walnut producers are facing tighter margins as rising production costs and global competition offset recent price gains.
Analysis from Terrain economist Matt Woolf shows walnut prices have recovered from record lows in 2022, but higher input and establishment costs are squeezing profitability. At the same time, global competition from countries like China and Chile is intensifying, eroding export share, and adding pressure on U.S. markets.
Cost structures are a major concern. Establishing a new walnut orchard now takes significantly longer to reach profitability. Under current conditions, break-even may not occur until the 13th to 17th year, compared to the 8th or 9th year under earlier cost assumptions. Higher interest rates and inflation-adjusted operating expenses are key drivers of that shift.
For existing orchards, the break-even price has also climbed. Producers now need about 63 cents per pound to cover costs, compared with roughly 38 cents per pound in 2017.
With older orchards being removed and fewer new plantings underway, long-term supply adjustments may follow.
USDA meteorologists have been warning about the low snowpack situation for a while now, saying water storage is becoming dire in Oregon, Nevada, and the Western U.S. Right now, water managers in an ag-heavy district of California warn their water allocations need to be adjusted, saying the system is not working as it was originally intended.
“Unfortunately, what we’ve seen is we’re dealing with a broken system,” explains Allison Febbo, general manager of the Westlands Water District. “As you mentioned, this is now becoming the norm, where even in years where we see very good precipitation. Unfortunately, this year we’ve seen a very low snowpack, which is causing these low allocations. But it really points to a system that is no longer working for the state. We have lack of storage availability. We have lack of infrastructure investments. We’re really excited that we just had a large investment from the Trump administration into the CVP, the largest ever made.”
Febbo told aginfo.net that recent White House efforts have been helpful, but says more needs to be done.
“We need continued investment statewide on fixing our water system,” she said. “It’s a combination of an overly burdensome regulatory environment that limits our access to water supplies without demonstrated benefits, along with lack of flexibility and nimbleness to really respond to this weather pattern that we have.”
