The past trading week was significantly busier than previous weeks. This was mainly due to buyers’ uncertainty caused by the approaching cold front and expected frost damage. While export buyers remained largely relaxed, some buyers were still hastily completing certain covers in the Turkish domestic market. The relaxedness concerning exports is essentially related to the fact that exporters did not react in panic to the cold front. Some sellers withdrew for the time being, but other exporters even made downward adjustments to their offers. Thus, the picture did not call for quick action. Also, after the “false alarm” from last year, a certain caution was called for in communication. Last season, a cold front also hit the Black Sea coast. However, this was almost three weeks earlier than this season, but with temperatures of -10 to -12 degrees Celsius regionally. The current cold front hit the Black Sea coast on Wednesday and, starting at an altitude of about 400 m first caused extensive snowfall and then frost of -4 to -7 degrees Celsius locally.
Pesimistic voices were right
In many places, the snow or moisture will have had a positive regulating effect on possible frost damage. However, we assume that there will be some damage locally, which will lead to a certain reduction in yield. In the coming weeks, we will examine the gardens and check whether the blossoms have been damaged and what reduction can be expected.
Since the Export Union has ventured out with an extremely high harvest estimate (approx. 850,000 mt), the reduction should be bearable. However, if it turns out that the pessimistic voices from the ranks were right with their estimate (< 700,000 mt), the correction that now occurs could be price-sensitive. What is in any case already the case now is an increased caution or withdrawal of offers concerning the 2023 harvest because of the expected frost damage. We assume that exporters will probably first get their bearings and observe each other’s behaviour in the coming week. Also, on average, commodity prices have already risen in the market, although not yet uniformly.
Slight weakening of Turkish lira
Concerning the exchange rate development, the trend of the previous week continues and we register a further slight weakening of the Turkish lira, which has a compensating effect on the price increase.
As already mentioned, we expect a somewhat more hesitant sellers’ market in the coming week and probably inconsistent but probably higher offers for the time being. Depending on the outcome of the frost damage, the upcoming TMO auction is eagerly awaited. If there is a major correction, the upcoming sale is likely to attract a lot of interest. Otherwise, the market will continue to wait for the impulses of the May harvest estimate.
bullet points
- Cold front brings snow and frost over the Black Sea coast. Some damage is likely to occur regionally.
- Market still reacts quite calmly to the frosty nights.
- Commodity prices rise due to frost, low supply and some domestic demand.
- The strong euro and the weak Turkish lira continue to compensate for a small part of the higher commodity prices.
- Market will probably reorient itself next week and be mixed for the time being
- Offers related to the 2023 harvest are currently mostly withdrawn.