Hazelnut Market: After there were already signs last week, the confirmation followed this week. The Turkish lira is once again on a massive downward slide. This week alone, the Turkish currency lost almost 12% of its value against the euro and the US dollar. The crash is taking place within a short period and is likely to fuel inflation in the country again. One reason for the decline is likely to be the central bank’s scaling back of foreign exchange sales. This had been expected, but the fact that the fall would then come at such speed is surprising.
New Finance Minister
Many Turkish market observers and experts from abroad had hoped that the new appointments to key positions would signal a return to a rational monetary and interest rate policy. The new Finance Minister, Mehmet Simsek, and the new head of the Central Bank, Hafize Gaye Erkan, who is only 40 years old, are considered a “dream team”. After all, they both come from investment banking and have many years of experience in the international financial market. However, it seems as if the markets do not care about the personalities. As long as the president continues to exert his unorthodox influence, the appointments are merely extras.
TRY/EUR – 12 month
In any case, the crash of the Turkish lira has led to significant corrections in export price lists. Especially for deliveries from the current harvest, the discount is significant. This is why we have also heard quite brisk demand this week. Many buyers have waited a long time and are now ready to buy at short notice.
Concerning the 2023 harvest, the level is now becoming somewhat more homogeneous. Furthermore, the state-guaranteed purchase price of the TMO has not yet been fixed, but the cheapening due to the exchange rate now allows more leeway to compensate for inflation.
Significant adjustment in prices
We are already seeing a significant adjustment in commodity prices in the hazelnut market. Due to the low availability in the market, as well as the demand that is now occurring, there has been a significant correction after all. For example, prices rose from 54 TRY/kg to 59 TRY/kg for hazelnut kernels in-shell. We have seen this effect again and again in recent years. As soon as the lira falls, raw material prices rise. All in all, prices are currently at a level slightly below the average of the last five years. Therefore, the level is now also appealing to the industry and they are now actively looking at longer-term cover again.
Relief and optimism
Overall, the situation has now come about as many expected in the hazelnut market. However, it was not certain. Therefore, there is now some relief and optimism. The TMO will be able to announce a price with a significant increase over the last year to compensate for inflation. The farmers are happy about this. Prices will still be attractive for exports because of the weak lira. The ones who suffer are the Turkish buyers at home, with other nuts still more expensive due to imports or taxes. From an economic point of view, what is happening is anything but sustainable. Specifically, state interference in the market is distorting the forces of supply and demand in such a way that, in our view, this may endanger Türkiye’s supremacy in the medium term.
As expected, the State Agricultural Union presented its harvest estimate of 730,000 mt this week. This is now considered realistic, after being ridiculed a few years ago. In the end, this significantly lower figure compared to the export union’s estimate has no relevance for the market for the time being. As long as Turkish citizens receive interest rates of around 40% p.a. on their deposits, a quick switch from nuts to liquidity is likely and restraint quite unlikely. Exporters are therefore expected to buy heavily during the main harvest season when the pressure on the commodity is highest.
The coming weeks are likely to be active weeks. The TMO will also be watching the market. Depending on the situation, a further tender could still be possible this season. It is uncertain whether there will be a correction in the exchange rate or whether the level will remain the same. Therefore, the interest of buyers is high at the moment.
Bullet points
- The expected scenario has occurred. The Turkish lira again lost massively against the EUR and USD as the central bank reduced its supportive measures.
- The exchange rate causes significant corrections in price lists.
- Commodity prices also rise significantly, dampening the exchange rate-induced price decline.
- Good demand due to attractive price levels. Export recovery is noticeable.
- Agricultural Union publishes lower harvest estimates. 730,000 mt vs. 810,000 mt by the export union. However, relevance for the market is low.
- The hazelnut market is being watched very closely by all players at the moment.
Import/Export Statistics
Please click to reach our marketplace