After reaching the 100 TRY/kg mark for hazelnut kernels in shell last weekend, the market was stable during the week. Occasionally, we were told that the market even softened somewhat. However, there is still disagreement among exporters regarding the further development. Thus, there are some who speak of the fact that this season would be equivalent to one with a frost and one must expect prices to continue to rise. Others, however, see the current level as the upper limit, while others consider 100 TRY/kg as the lower limit for the coming months, but also see only limited room for improvement.
Although there is no consensus on further developments, some trends are already emerging in the hazelnut market. On the one hand, the situation in the western Akcakoca region seems to be easing somewhat. Although there is also a shortfall in quantities, the quality here continues to be good. A large proportion of the farmers here now seem willing to sell at the current price.
Speculative behaviors
The situation is different in the eastern Black Sea region. Here, speculative behavior on the part of farmers can still be observed. An estimated 30% of the harvest is not put on the market by the farmers and is taken home. At least a quarter of the goods that are given away are only given away on commission. While this behavior is currently causing prices to rise, it also has the potential to cause prices to fall again. If the commodity were sold at the current price, the actor would realize losses in a falling market, which also prevents a market from giving way. For farmers, a falling market would simply represent reduced revenues. Therefore, a large “unsold” quantity is not considered a problem.
Struggling with price level
What we are also finding is that, depending on the region, crackers in the hazelnut market have still not started operating across the board. This downstream stage of the value chain is struggling with the current price level, as are buyers in Europe. Therefore, there are still no representative statements on the core size distribution. However, first voices say that there is a tendency for larger kernels again this year, despite the poor harvest, which would contradict the first reports or attempts to explain the reduced quantity. For this reason, we do not want to evaluate the statements yet and wait until the season has also started for crackers. What is changing now, however, is the quality of the delivered batches. Fortunately, these are now getting better. It seems as if the farmers gave up the worst lots first and are now speculatively keeping the better lots.
Harvest expectations
In terms of volume correction, we are hearing from the region from Trabzon to Giresun to Ordu of local lower yields of up to 40% compared to the previous year. To put this into perspective, it has to be said that the previous year’s harvest was also a very good one. A certain shortfall in yield was therefore anticipated from the outset. The region around Samsun, on the other hand, is recording good yields, and in the Akcakoca region, too, the shortfall is probably between 25 – 30%, albeit with good quality. In total, the hazelnut market still expects a harvest of about 600,000 mt. If this is confirmed, the catastrophe that some foresee should not occur. Only with a quantity of less than 550,000 mt would one have to worry seriously in our opinion.
What is conceivable in our opinion is that this season the ratio between processed and natural products changes. According to our information, the quality of the harvest in Italy should also be rather moderate. This would be the next origin, besides Georgia, which is likely to be more passive in natural kernels. Thus, the market for natural kernels with good qualities could well remain firm, whereas the inferior lots would be available at a discount and would find their way into processing by roasters.
Pressure on TMO is increasing
What should also be noted is that the price increase that farmers in the hazelnut market have experienced locally was also only possible due to the massive depreciation of the Turkish lira. This ensured that the price level remained attractive for export. This effect benefited buyers and producers alike. However, we expect conditions to be different this season. This process is responsible for the high inflation rates in Türkiye and this is what the new Turkish government has now started to actively fight. Just on Thursday, the Turkish Central Bank raised the key interest rate again by 5 percentage points to now 30 percent per annum. This means that it is now giving priority to fighting inflation. Therefore, the question is how the managers who make the strategic decisions at the TMO now assess the current market situation. The primary goal of the TMO is to guarantee farmers an adequate income. However, there are also goals such as sales promotion and location strengthening. Accordingly, the TMO is now expected to fulfill its regulatory role. Whether it will do so is uncertain. However, the pressure on the decision-makers is increasing strongly.
Market leader: Quite but panicked
The hazelnut market leader has not yet reacted to the changed market situation. However, we hear that it has also placed a relatively low level in Italy, moreover, it is currently not getting the necessary quantities. In Türkiye, he also does not receive the usual quantities. However, according to today’s information, the contracts are fulfilled by other exporters at the market leaders and this to partly large losses. Overall, the behavior of the market leader is currently anything but panic, which we consider positive.
Europe may prefer short-term contracts instead of long-term contracts at this price level
The new price level has now arrived in Europe. The market feeds on small purchases, primarily from stocks. Many lots have changed hands in recent weeks and the level has gradually increased. However, since most players from the trade have not concluded long-term contracts, the first re-coverings are now taking place at current market prices. It is interesting to note that many contracts are being concluded well below the indications of the major exporters. The market continues to be very heterogeneous. This is particularly clear in the case of inquiries for later dates. However, we tend to see that almost all exporters are now actively bidding again and a certain calm is returning after the excitement of the first weeks. However, it seems that if the TMO does not act soon, Europe will have to come to terms with the level for the time being, which is difficult for many. Therefore, we expect buying behavior to remain cautious in the coming months and to focus on short-term cover.
Bullet points
- Commodity prices stagnate during the week – export price lists, however, on average significantly higher than in the previous week.
- The behavior of farmers is uneven. Some are now selling, others continue to speculate on rising prices.
- The market leader continues to be unresponsive to the changing situation – its counterparties (major exporters and crackers) appear to be fulfilling their contracts.
- Pressure on TMO continues to increase to intervene in the market in a regulatory way (sale of inventory).
- Price lists are still very heterogeneous.
- Cheap stocks in Europe are now scarce, first trades are now taking place at the new price level. However buying behavior in the hazelnut market remains limited and hesitant. Turkish central bank raises key interest rate by 5% to 30% p.a. once again. Although this does not strengthen the Turkish lira, it is a further step that counteracts a devaluation.