California walnuts are entering Q2 in an unusual position: abundant supply, improving shipment momentum, and prices trading below production costs for many growers. The 2025 crop came in at 801,432 inshell tons, 13% above the official USDA estimate of 710,000 tons. Combined with a carryover of approximately 70,000 tons, total available supply stands at over 871,000 tons.
Despite the record December performance, with inshell shipments up 89% and shelled up 35% year-on-year, season-to-date figures remain approximately 12% behind last year’s pace, reflecting a slow start to the season earlier in the autumn. The 24.8% jump in new sales commitments suggests buyers are engaging at current price levels. For European buyers specifically, kernel shipments into Germany are up 75% and the Netherlands up 47% year-on-year, indicating solid underlying demand for shelled product.
In Q3, attention will turn to whether the market can digest its abundant supply before the 2026 new crop arrives. If the 364,000 tons of unsold inventory does not clear at sufficient pace, the market risks entering the new crop period with a second consecutive heavy supply burden. Growers are already showing resistance to further price reductions, which may slow the pace of new sales if buyers continue to wait for additional concessions.
The Middle East and North Africa have emerged as a standout growth region for walnut demand, with strong inshell shipment increases across Turkey, the UAE, Egypt, Iraq, Jordan, Lebanon, and Saudi Arabia. Asian demand is softer overall, with Japan and Korea both showing weaker kernel demand, limiting the degree to which Pacific Rim markets can absorb California’s surplus.
By Q4, the arrival of new-crop California walnuts will reset the supply conversation, but the pricing environment will be heavily shaped by how much of the 2025 crop inventory remains unsold at that point.
Read the full walnut market analysis in Vesper’s free Bakery H1 2026 Market Outlook: https://vespertool.com/downloads/