On Monday evening, as in previous years, it was President Erdoğan himself who published the TMO’s new hazelnut purchase prices. At 82.5 TRY/kg for hazelnuts of the Levantine variety, the purchase bid is slightly higher than what many expected, but it is not a big surprise. In this way, TMO remains true to its line. All purchasing bids in recent years have been roughly oriented around USD 3/kg. Depending on the size of the harvest and expectations of exchange rate developments, there were minor upward and downward corrections in each case. It is an attempt to keep the price at least at a certain level that is presentable for both buyer and seller.
As a result of the publication, most sellers withdrew for the time being to wait for the market reaction. The forecasts were very mixed. For example, we hear rather pessimistic forecasts from most of the larger producers with regard to crop size, quality and possible raw material prices. However, there are other producers who are much more optimistic about the course of the season and do not expect prices to rise any further now.
In the coming week, the market leader will probably announce its purchase price. This price will provide information on how the market leader will view the development. If the price is close to the hazelnut price of the TMO, this indicates a rather pessimistic attitude. If the price is set rather low (approx. 75 TRY/kg) then this is the signal to the many small receiving points not to offer too high prices to the farmers. However, the behavior of farmers will be one of the most important factors.
The question is, up to what price are farmers willing to sell the goods immediately?
Last we heard voices that farmers are dissatisfied with the hazelnut price of TMO. Their expectations were rather in the direction of 100 TRY/kg. We consider this to be unrealistic. Even the TMO knows that this level (at the current exchange rate) would do more harm than good. In our opinion, this will be decided only in the peak season of harvest. Last season, too, we had a short phase of 1-2 weeks when there was pressure on goods and prices dropped in the short term. Therefore, in the coming weeks, it is important to closely monitor the market, because almost all parties agree that this will probably be the most favorable time in the season to buy raw material.
In principle, we agree with this, but we must not forget the financing costs. Even if one could buy for e.g. 70 TRY/kg at this time, one must calculate a premium of approx. 25% due to the storage and financing costs for a holding period of half a year. That is one of the reasons why we are currently seeing such large differences in prices again.
It should also be mentioned, however, that at least for the first half of the season we do not see hazelnut prices rising to extreme heights. TMO continues to hold about 120,000 mt from the 2022 crop, which it will eventually offer for sale at some point. This will also allow it to set a certain ceiling on prices. We expect the market leader to cover its main volume in the first 3 months of the season.
This week, prices have been more heterogeneous than ever. However, this is also due to the fact that some exporters have given prices based on the 2022 crop and others have already switched to the 2023 crop. This will be the case in the coming week, but probably all, then the the lists should be somewhat more uniform.
For the coming week, as already mentioned, we expect the market leader to position itself. We will also see then how the appointments are booked at TMO. The first dates can be booked from August 21 onwards. We assume that the appointment calendar will be full very quickly, but possibly not all farmers will take the appointments then.
In terms of the exchange rate, we do not expect any serious changes next week. The next meeting of the Monetary Policy Committee is on August 24. We expect another small interest rate step. However, we do not expect the market to react then either. This will probably only be if the rate hike fails to materialize. Despite all the (relative) constancy of the last few weeks, the development should be well observed, since this is decisive for the development of the commodity prices (e.g., the level of the sales bid of the TMO).
In terms of demand, we do not expect any big trades next week. Only speculative offers could lead to one or the other deal. Otherwise, the motto for most is wait and watch.
Bullet points
- TMO publishes the purchase bid at 82.5 TRY/kg for Levant grades.
- Sellers withdraw as a first reaction. The price level is rising significantly, but this is also due to the statistical transition from harvest 2022 to harvest 2023 in the price lists this week.
- The picking of the seeds has begun in the coastal regions.
- Expectations of the sellers about the price development, harvest forecast and qualities differ greatly from each other – the market is very confusing at the moment.
- The market is now waiting for the market leader to position itself.
- Exchange rate was stable during the week. Currently not perceived as a significant factor. But it should definitely be considered.