Although the past trading week was still characterized by good demand in hazelnut market, we now sense that demand is declining again. In recent weeks, almost all suppliers have been able to fill their order books for the coming months. In addition to exports, domestic business is also going well for Turkish producers. Therefore, the mood is currently conciliatory. The question is whether this will continue. The big unknown that is still outstanding is the government guaranteed purchase price by the TMO. So there were rumors that the TMO will publish it this month. Until now, it was assumed that it would not be published until mid-August.
Farmers hope for 100 TRY/kg
There is a certain volatility in the market release. Currently, the market for hazelnut kernels in shell is around 62 TRY/kg, with practically no trade volume to match the price. Farmers are hoping for a price of 100 TRY/kg. Exporters expect a price between 75 and 80 TRY/kg. Assuming that the free market will settle about 10 TRY/kg below the TMO price, the market price is then far from farmers’ expectations. The question is whether disappointed expectations will then lead to delayed sales behavior, for example. Here lies some uncertainty for the start of the season.
Will exchange rates compensates price fluctuations?
The wide range of possible prices also leads to very heterogeneous price lists in relation to the coming harvest. As we are currently experiencing, the strategies of exporters are very different. Some continue to hold commodities in anticipation of sharply rising prices. Others have no position and are currently rather withdrawing and waiting. Others continue to bid at very attractive levels in hazelnut market. All options are conceivable. However, we think it is unlikely that prices will fall below the current level due to raw materials. Looking at the possible scenarios, a rise in commodity prices must be expected in the coming weeks. The question that European buyers are asking themselves is whether the exchange rate will be able to compensate for this.
Financial markets
Looking at developments in the financial markets, no serious changes are expected in the short term. The Turkish National Bank has initiated the interest rate turnaround and will presumably raise the key rate further in small steps. It is doubtful whether this will cause the Turkish lira to gain in value again, but a further weakening is not necessarily to be expected, although it is not possible to make reliable forecasts here. In general, however, the opinion prevails for the coming months of a trend toward stability. In principle, however, this is no longer relevant for most buyers, as most of the cover for the fourth quarter has already been provided. Forecasts would be interesting again from the first quarter of 2024, but here the opinions diverge again.
There have been no statements from the market leader so far. We expect similar behavior as in previous years. They will wait for the price of the TMO and then place an appropriate bid. Purchases will start from 01 September and initially only hazelnut kernels in shell will be purchased again and later switched back to natural kernels (in addition).
With regard to the vegetation status, the hot weather of the last week(s) has ensured that the backlog of vegetation has been made up somewhat. We expect that until in about 10 days the first farmers in the gardens near the beach will start picking the seeds.
In total, we expect a similar hazelnut market for the coming week. Prices have been stable to slightly rising, but this has also been due to fluctuations in the exchange rate. Thus, the interest rate decisions of the FED and the ECB (each a plus of 0.25%) have led to corresponding fluctuations. As I said, the next impulse will come from the TMO and the subsequent decision of the market leader. We are waiting with bated breath for the market’s reaction to this.
Bullet points
- Demand now declines slightly after strong trading weeks.
- Commodity prices are rising slightly. A further increase is expected in the coming weeks
- The market is waiting for the TMO’s purchase bid and the market leader’s response to it
- There is a lot of potential for disappointment in the market, especially for farmers.
- The interest rate decisions of the Fed and the ECB lead to slight changes in the price lists.
- The market is still very heterogeneous among suppliers, as positioning varies.