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Walnut Presentation January 2013 Presented by: Steve Zaffarano Diamond Foods, Inc.
Walnuts - Overview
Perspectives Commodity Supply Demand Industry Trends External Factors
Fundamental: supply/demand, weather, land, resource constraints Non-Fundamental: speculation, FX, counterparty risk, carrying costs Political: food for fuel, subsidies, taxes Social: changing diets, growing &wealthier populations, urbanization
Sacramento Valley
Southern San Joaquin Valley
Northern San Joaquin Valley
Regional Production Top 5 Counties
2011 Pounds (1,000)
% of Total 2010 crop
Sac. Valley 463,554 50.4%
Butte 136,564 14.8%
Sutter 82,560 9.0%
Northern SJV 248,446 27.0%
San Joaquin 150,328 16.3%
Stanislaus 93,882 10.2%
Southern SJV 208,330 22.6%
Tulare 116,954 12.7%
Approx. 3,500 growers statewide Approx. 245,000 total acres
920,330,000 lbs. produced in 2011
Walnut Producing Regions California Walnut Industry
Source: California Walnut Board
Walnut Production
497
237
305 282
326 323 354 344
323
434 436
502
460
470
100
150
200
250
300
350
400
450
500
550
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012e
Tons
(in
thou
sand
s)
Crop Year
109% increase in production
since 2000
As of 12/31/12 Industry Walnut Receipts = 497,200 tons
California Walnut Industry
Source: California Walnut Board
Ashley 1.3%
Chandler 44.1%
Hartley 11.8%
Howard 12.9%
Payne 1.2%
Serr 5.7%
Tulare 11.5%
Vina 6.0%
Others 5.5%
Ashley 1.9%
Chandler 41.6%
Hartley 14.0%
Howard 10.9%
Payne 1.6%
Serr 7.2%
Tulare 9.3%
Vina 7.1%
Others 6.3%
Walnut Production California Walnut Industry, By Variety
Source: California Walnut Board
Walnut Production California Walnut Industry, By Variety
0
2,000
4,000
6,000
8,000
10,000
12,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Ashley
0
2,000
4,000
6,000
8,000
10,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Franquette
0 2,000 4,000 6,000 8,000
10,000 12,000 14,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Payne
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Hartley
Source: California Walnut Board
Walnut Production California Walnut Industry, By Variety
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Howard
0
10,000
20,000
30,000
40,000
50,000
60,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Tulare
0 5,000
10,000 15,000 20,000 25,000 30,000 35,000 40,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Serr
0 30,000 60,000 90,000
120,000 150,000 180,000 210,000 240,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Chandler
Source: California Walnut Board
World Walnut Production
Country 2008 2009 2010 2011 2012 e % of Total
USA* 434 436 502 460 497 e 39.9%
China 540 514 518 485 500 e 43.6%
Turkey 94 68 66 75 77 e 5.6%
India 41 24 28 28 25 e 2.3%
France 39 36 33 33 27 e 4.1%
Italy 22 14 18 14 12 e 1.2%
Chile 25 28 33 40 48 e 3.3%
Total 1,197 1,121 1,200 1,136 1,159e 100.0%
Short Tons
e = estimate Source: USDA/FAS *Source: California Walnut Board
(1,000 Lbs.) 07/08 08/09 09/10 10/11 11/12 12/13
Carry-in Inventory (8/31)
43.8 44.1 115.5 84.4 81.3 98.0
U.S. Walnut Crop 646.0 868.6 872.0 1,003.8 920.0 994.0 e
Total Supply 689.8 912.7 987.5 1,088.2 1,001.3 1,092.0 e
07/08 08/09 09/10 10/11 11/12 12/13 CWB
Projected
MY 12/13 Aug 1 – Dec 31
Export Inshell 99.0 152.1 185.4 264.0 226.7 222.0 215.8 Domestic Inshell 19.7 21.4 19.4 19.9 16.9 17.0 11.7 Total Inshell 118.7 173.5 204.8 283.9 243.6 239.0 227.4
Export Shelled 89.0 125.4 131.1 152.1 129.4 138.0 57.4 Domestic Shelled 148.9 158.3 179.2 165.8 158.3 161.5 66.0 Total Shelled 237.9 283.7 310.3 317.9 287.7 299.5 123.4
Total ISE Shipments in M Lbs
645.7 797.2 916.8 1,012.0 903.4 919.7 504.8
Walnut Supply/Demand Overview California Walnut Industry
Source: California Walnut Board
Historical Walnut Demand
-
20
40
60
80
100
120
140
160
180
200
Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug
Mill
ion
ISE
Poun
ds
08/09 09/10 10/11 11/12 12/13
California Walnut Industry, By Month
Source: California Walnut Board
123,
151
118,
768 173,
549
205,
103 28
1,28
3
244,
383
227,
530
0
50,000
100,000
150,000
200,000
250,000
300,000
06/07 07/08 08/09 09/10 10/11 11/12 12/13 YTD
1,00
0 Lb
s.
Total Inshell Shipments
258,
373
237,
633
283,
882
314,
454
318,
345
286,
803
123,
180
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
06/07 07/08 08/09 09/10 10/11 11/12 12/13 YTD
1,00
0 Lb
s.
Total Shelled Shipments
737.
0
645.
7 797.
2 916.
8
1,01
2.0
903.
4
252.
2
0.0
200.0
400.0
600.0
800.0
1,000.0
1,200.0
06/07 07/08 08/09 09/10 10/11 11/12 12/13 YTD
MM
Lbs
. Total ISE MM
Total Walnut Demand California Walnut Industry, By Year
Source: California Walnut Board Note: Shelled Kernel demand not converted to ISE
Insh
ell
123.
2
Insh
ell
118.
8
Insh
ell
173.
5
Insh
ell
205.
1
Insh
ell
281.
3
Insh
ell
244.
4
Insh
ell
227.
5
Shel
led
258.
4
Shel
led
237.
6 Shel
led
283.
9
Shel
led
314.
5 Shel
led
318.
3
Shel
led
286.
8
Shel
led
123.
2
0.0
100.0
200.0
300.0
400.0
500.0
600.0
06/07 07/08 08/09 09/10 10/11 11/12 12/13 YTD
MM
Lbs
Inshell Shelled
Source: California Walnut Board Note: Shelled Kernel demand not converted to ISE
(1,000 Lbs) 07/08 08/09 09/10 10/11 11/12 12/13 YTD
Inshell 19,752 21,447 19,406 19,962 16,609 11,679
Shelled Kernels 148,956 158,397 179,258 165,894 157,725 66,045
Domestic ISE 367,788 369,576 418,190 399,386 379,948 160,094
% of Total ISE 55% 46% 46% 39% 42% 31%
0%
10%
20%
30%
40%
50%
60%
0
50,000
100,000
150,000
200,000
250,000
07/08 08/09 09/10 10/11 11/12 12/13 YTD
Shelled Kernels Inshell % of Total
Domestic Walnut Demand California Walnut Industry
Source: California Walnut Board Note: Shelled Kernel demand not converted to ISE
(1,000 Lbs) 07/08 08/09 09/10 10/11 11/12 12/13 YTD
Inshell 99,016 152,102 185,409 264,090 227,792 215,762
Shelled Kernels 89,034 125,485 131,148 152,137 129,080 57,355
Export ISE 307,038 428,208 488,244 613,750 523,424 344,650
% of Total ISE 45% 54% 54% 61% 58% 67%
0%
20%
40%
60%
80%
0
100,000
200,000
300,000
400,000
500,000
07/08 08/09 09/10 10/11 11/12 12/13 YTD
Shelled Kernels Inshell % of Total
Export Walnut Demand California Walnut Industry
Walnut Demand Distribution California Walnut Industry, By Year
(1,000 Lbs) 07/08 08/09 09/10 10/11 11/12 12/13 YTD % of Total Demand
Inshell Domestic 19,752 21,447 19,406 19,962 16,609 11,679
Shelled Domestic 148,956 158,397 179,258 165,894 157,725 66,045
Total Domestic ISE 367,788 369,576 418,190 399,386 379,948 160,094 32%
Inshell Export 99,016 152,102 185,409 264,090 227,792 215,762
Shelled Export 89,034 125,485 131,148 152,137 129,080 57,355
Total Export ISE 307,038 428,208 488,244 613,750 523,424 344,650 68%
Total Industry ISE 674,826 797,784 906,434 1,013,136 903,370 504,744
30% 35% 40% 45% 50% 55% 60% 65% 70%
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13
Domestic Export
Source: California Walnut Board
Crop Year Crop (000)
Beginning Inventory
(000)Total Supply
(000)Utilization
(000)% Change Utilization
Beg. Inventory as % of Total
Supply Utilization as
% of Crop2000 478,000 163,700 641,700 529,100 1% 26% 111%
2001 610,000 112,600 722,600 579,700 10% 16% 95%
2002 564,000 142,900 706,900 573,700 -1% 20% 102%
2003 652,000 133,200 785,200 638,700 11% 17% 98%
2004 650,000 146,500 796,500 674,000 6% 18% 104%
2005 710,000 122,500 832,500 743,700 10% 15% 105%
2006 692,000 88,800 780,800 737,000 -1% 11% 107%
2007 650,000 43,800 693,800 649,700 -12% 6% 100%
2008 872,000 44,100 916,100 800,600 23% 5% 92%
2009 874,000 115,500 989,500 916,756 15% 12% 105%
2010 1,006,000 84,400 1,090,400 1,013,100 11% 8% 101%
2011 920,330 81,760 1,002,090 903,400 -11% 8% 98%
2012e 994,400 98,000 1,092,400 919,700 2% 9% 92%e = estimate Source: California Walnut Board
Marketing Years Ending Aug 31 2012 beginning inventory based on WMB Report 10/10/12, 2012 Crop based on WMB Shipment Report 1/11/13
Walnut Supply & Utilization California Walnut Industry
e e e
2012 Crop Highlights
Favorable growing conditions through spring & summer
By late summer, industry expected crop to be 500,000+ tons
In September, CASS estimated crop at 470,000 tons Lowest average nut set in 5 years (down 1% from 2011) Small inshell size: Jumbo size for Hartley, Vina, Chandler, & Howard down10
points from prior year
Opening prices similar to prior year, moved up rapidly
Currency not an issue; China crop rumored less than originally expected
In December, WMB reported 497,000 tons received Total Shipments = 504 M lbs (up 3.4% over prior year)
Inshell = 227 M lbs (up 5.7% over prior year) Shelled Kernels = 123 M lbs (up 3.4% over prior year)
Short Term Outlook
Health benefits driving increased consumption Economies recovering – lumpy/uneven Adequate supply Walnut commerce is more global Price escalation Food safety impact expected, but unknown Dependant on exports for growth
New markets Existing markets Traditional and Non-traditional destinations
Competing nuts available, priced competitively
Long Term Outlook California Walnut Industry, Tons per Acre
1.19
1.50
1.34
1.53
1.51
1.65
1.59
1.48
1.95
1.92
2.12
1.88
2.03
2.3
6
2.4
1
2.4
6
2.5
1
2.5
6
-
0.50
1.00
1.50
2.00
2.50
3.00
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
e
2013
e
2014
e
2015
e
2016
e
2017
e
Tons
Per
Acr
e
Crop Year Source: USDA NASS Walnut Objective Measurement Report
2012 crop year based on California Walnut Board reported receipts as of 12/31/12 2013-2017 projections based on average historical acreage and tons/acre increases
Long Term Outlook California Walnut Industry, Production
237 30
5
282 32
6
323 354
344
323
434
436 50
2
460 49
7 548
566
584
601
619
100
200
300
400
500
600
700
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
e
2013
e
2014
e
2015
e
2016
e
2017
e
Tons
(in
thou
sand
s)
Crop Year Source: USDA NASS Walnut Objective Measurement Report
2012 crop year based on California Walnut Board reported receipts as of 12/31/12 2013-2017 projections based on average historical acreage and tons/acre increases
Long Term Outlook
Productive capacity (bearing & non-bearing) poised for larger crops Availability of trees and land will create constraints
Build worldwide, broad-based, balanced, sustainable
demand Increase consumption in existing markets
Focus on developing and emerging destinations
Commodity growth/consumption likely greater than
economic due to a growing, more prosperous global population
Questions?
