After a long hesitation, the correction of the hazelnut market leader’s purchase offer from TRY 80.0/kg to TRY 95.0/kg for hazelnut kernels in shell was made on Wednesday. Many consider this step as the next strategic mistake of the market leader. However, it must be said that these voices also come from those who have already purchased quantities at sometimes higher prices and are now not willing to sell large quantities at the bid price. In fact, the market leader will probably not be able to buy large quantities in a short time with this bid. However, it also clearly signals to market participants that the price spiral must come to an end.
Will farmers continue to hold the product?
Looking at the exporters’ price lists, the hazelnut market hardly reacted to the announcement. The price for farmers at the time of the announcement was 92 – 93 TRY/kg in the open market. The buying bid will probably mark the lower limit for the next two months, or a price slightly below it. As some sellers (traders and crackers) needed liquidity, there were isolated sales, so the market leader could also cover some quantity (< 10’000 mt). We expect farmers to continue to hold the product for now. If there are any sales, they will be at about the current level, as otherwise the traders will not be able to deliver the goods at a premium to the market leader.
No bid for natural kernels yet
It is also interesting that the market leader has still not placed a bid for natural kernels in the market. We suspect that parallel to the purchase bid, cover is already being provided via other exporters in order not to further inflame the hazelnut market. The action thus deviates from the usual behavior of recent years. If no flood of demand reaches the market in the coming weeks, the level should remain stable for the time being. However, should demand increase significantly, prices may also rise again. Since most buyers still have to cover for the coming year and the signs are not pointing to a price slide, we could already see a plus in demand this week.
For the next two months, we still expect some buying decisions that have been postponed so far. However, as the premiums for later periods remain quite significant, we expect buyers to continue to cover only short-term needs and avoid long-term covers.
The market continues to be characterized by the heterogeneity of export price lists. Overall, the difference is now decreasing somewhat, but it is still worth comparing.
Another interest rate hike
On Thursday, the Turkish central bank raised the key interest rate for the fifth time in a row, this time by 5%, in line with the expectations of many analysts. The key interest rate is currently 35% p.a. and further interest rate steps are to be expected, because inflation continues to be over 60% compared to the same period last year. As market expectations were met, the Turkish lira remained stable against the euro and the U.S. dollar, and it can be assumed that the central bank will do everything in its power to ensure that this remains the case.
Bullet points
- The market leader publishes its purchase bid at TRY 95.00/kg for hazelnut kernels in shell. There is still no bid for natural kernels.
- Raw material prices slightly weakened in a weekly comparison, but rose again slightly after the publication of the purchase bid.
- Export demand with a slight plus, so some covers were made at the current level, but with timely delivery. Long-term covers continue to be avoided.
- Export price lists continue to be very heterogeneous in the hazelnut market. It is worth comparing.
- The Turkish central bank raised the key interest rate another time by 5%. This was expected, so the exchange rate remains stable.