The South American nation's walnut planted area has fallen nearly 5% over three years to 43,990 hectares, with growers increasingly converting orchards to cherries, lemons and mandarins that offer better returns. Urban expansion is also claiming agricultural land in key production regions.

"The small decrease in area planted is due to market conditions and competition from more profitable crops," the USDA report stated, noting that walnut acreage in the Santiago Metropolitan region -- Chile's top producing area -- has dropped 5.5% over the past three years.

Almond production is expected to edge down 0.9% to 11,450 tonnes in MY 2025/26, though the crop remains competitive due to strong domestic demand that absorbs about 67% of production.

Export markets are shifting for Chilean walnuts. Turkey has emerged as the top destination with shipments jumping 41% to 11,844 tonnes through July, while exports to India plummeted 54% to 6,914 tonnes. Chile faces a prohibitive 100% tariff on walnut exports to India, and industry representatives are working with government officials to negotiate reduced rates.

Despite production declines, export values have surged. Chilean walnut export revenues climbed 44% to $240.8 million in the first seven months of MY 2024/25, buoyed by tight global supplies and firm prices.