Anyone currently observing the hazelnut market can only shake their head at the development. Thus, the market is developing completely contrary to expectations. Even if one includes the correction of the harvest quantities, one comes to the sum actually to the fact that the quantity could become scarce this year, nevertheless, it should still be sufficient. Therefore, there is a lack of understanding about the price jumps in recent weeks.
All quantities are not available in the free market
What is not taken into account in the simple summation, however, is that not all quantities are available to the free market. If one were to include in this calculation the fact that exporters hold around 70,000 mt of merchandise at the end of each season in order to secure shipments for the coming weeks, the picture would immediately change.
Pressure on TMO
In addition, the TMO controls a large inventory of the transition from the 2022 crop to which the free market does not have access. Therefore, the market is dependent on a sale by the TMO. Accordingly, there is already a lot of pressure on the TMO’s managers. If a tender were to take place currently, the market would quickly ease. While this scenario would be good for the overall market, it is not very realistic. For example, a sale currently would entail an uprising of farmers, which is not politically desirable in view of the regional elections next spring. Therefore, the market will definitely remain as confusing as it is now for the next one to two weeks.
One question that we are currently asked on a daily basis is what is currently happening in Türkiye and why prices have risen so sharply in such a short time. The following factors play a role here.
The main reason is the current availability in the hazelnut market, which is very poor. Currently, there are no significant quantities of raw material coming into the market. Thus, a limited supply meets a large demand. Why is this so?
Quantity correction
Firstly, the harvest is basically almost two weeks later than usual. This is normally not a problem, but this year it is a factor that has an additional negative impact on the situation. However, the main factor is the quantity correction currently experienced in the harvest in the gardens. Thus, the quantity harvested is significantly lower than expected, also the quality is significantly worse than in previous years.
Why yield is low?
The quantity correction had been predicted by some, but not to the extent that it is now occurring. The harvest is estimated by counting the number of nuts on the bushes. The current experience is that although there is a large number of nuts, in some regions up to 30% less weight was harvested than normal (smaller kernels and many empty and diseased nuts). This is explained by the fact that after two very good years in a row, the bushes may be exhausted and also the weather conditions were not optimal for the development of the nuts. In addition, there is an increased occurrence of the marmorated tree bug. The combination of lower quantity and poor quality is currently leading to significant discounts in the sale of kernels and correspondingly dissatisfied farmers. Therefore, they are still holding back the kernels in anticipation of higher prices.
Different prices in hazelnut market
Many local crackers, especially the larger ones, usually start the main season in two or even three shifts. This effort only makes sense for them when they have a certain amount in stock or the supply is secured. Since this is currently not yet the case, they have not yet started to work, therefore no natural goods come to the roasters, although a certain amount is already available on the market. This also leads to the fact that we currently have a temporary shortage. However, since the exporters have to fulfill their contract obligations, they are dependent on buying goods now. For better or worse, they now have to pay the high prices in the market and will thus realize large losses. Thus, an acceptance of the price level takes place in the origin, which still meets with rejection in Europe. The exporters have quite a lot of respect due to the unclear supply situation and react with partly enormous risk surcharges or do not offer at all. A few still offer a comprehensible calculation, so at the moment there are again very different prices in the market with ranges of sometimes one euro per kilogram.
Overall, we have seen another significant jump in prices this week. The price for hazelnut kernels in shell was 83 TRY/kg towards the end of the week, slightly above the TMO’s purchase bid. If this remains the case, the TMO is unlikely to receive much more product this year, about which they are probably not unhappy. For one thing, the volume is then facing the free market and a put option becomes more likely.
Alternative origins – Azerbaijan and Georgia
On the demand side, there is still some interest in coverage, but the level is deterring buyers. Those who can are switching to alternative origins. However, we have seen that origins such as Azerbaijan were still offering attractive deals at the beginning of the week. Towards the end of the week, we saw large price jumps here as well. While the crop in Azerbaijan is said to be in the normal range, the Georgia origin is experiencing the same scenario as Türkiye. The crop size is well below the original expectation and the quality is very poor. On average, for natural kernels, there are 3 – 7% kernels with internal mold problems, depending on the region. The origin is thus heading for a difficult season.
Overheated market
In the next two weeks, we will have to wait and watch the situation in hazelnut market. We are still waiting for the results of the first crackings from the Akcakoca region. If these turn out better, this should ease the situation a little. We also assume that the farmers will not hold back the goods for long, as the quality is not improving. We think the market is currently overheated due to the lack of inflow. As soon as this is restored, there should be a certain calming down. It is questionable, however, whether the market leader will have to adjust its purchasing bid, or whether it will be able to obtain sufficient raw material at these prices. A decline to the level we had before the harvest is currently not considered realistic, as stability is also assumed by the majority on the part of the exchange rate development.
Bullet points
- The low inflow of raw materials meets strong buying interest
- Exporters need to buy to fulfill contracts and are now realizing large losses, further driving up prices in hazelnut market.
- Crop size is corrected significantly downward. Volume correction due to smaller size, and many empty and diseased nuts.
- Raw material price in the free market reaches the level of the TMO price. TMO will therefore hardly receive any commodity.
- Exporters put pressure on TMO to sell inventory.
- Exporters’ behavior is very different and so are their price lists.
- Demand from Europe is available, but hardly any buyer wants to conclude a deal at this level.
- The exchange rate was stable over the course of the week. The majority expects this also for the near future.
Import/Export Statistics
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