Difficulties and Optimism in Turkish Hazelnut Market

The past few weeks have been difficult ones for exporters in Turkish Hazelnut Market. Extreme volatility in commodity prices and the exchange rate demanded nerves and patience from all market participants. Fortunately, this happened at a time when traditionally not much business takes place; thus, most players were able to sit out the turbulence

Now the first third of the current season is history and it is time to summarise what has happened and venture an outlook on the further course of the season. This season will probably be characterised by the fact that despite the surplus from the previous season and a very large harvest, it will probably come to the fact that the current crop can be marketed almost completely. This was not foreseeable at the beginning of the season because the harvest started more than two weeks late and the export figures lagged. However, the export figures for December (approx. 158,000 mt) statistically indicate an export of approx. 350,000 mt for this season. This is mainly because the alternative origins had poor harvests this season. In addition, the Turkish market is the price leader due to what is happening in the foreign exchange market.

The role of TMO

In addition to exports, however, the domestic market is also recording very strong figures, which may be because imported dried fruit is currently very expensive for the Turkish population. Therefore, domestic nuts seem to be preferred even though hazelnut kernels are more expensive domestically than ever before. Looking at the quantity bill, a situation is emerging that the market will probably rely on TMO’s product. This is also the uncertainty that is causing raw material prices to rise again at the moment. There is still no statement from the TMO regarding a possible sale date and a possible sale price. When the TMO last acted as a seller in April 2020, the selling price was 21 TRY/kg, but this was at an exchange rate of about 7 TRY/USD. If this orientation of the equivalent of 3 USD/kg for hazelnut kernels in-shell were again used as a benchmark, one would have to expect a significant increase in prices. Some exporters are concerned about this scenario, so their offers currently include a certain risk premium. This, together with internal raw material, financing and exchange rate costs, is another reason why the price lists are so different at the moment. This scenario is known by many, so the few farmers who still have raw materials do not want to sell at the moment and prefer to wait.

Exchange rates push prices

As there were hardly any inquiries for export in recent weeks, the meagre supply was hardly noticeable. However, if more inquiries come into the market now, raw material prices may quickly rise. Developments in the foreign exchange market could also support this. After the abrupt stabilisation caused by the announcement of government guarantees for deposits, the lira is again coming under pressure due to negative reports about inflation in the country (most recently 36%). As we have seen over the last few weeks, a favourable exchange rate means a quick adjustment in commodity prices. The only reason that could support continued moderate price levels is the unclear position of exporters. If they have bought large quantities speculatively and still have quantities in stock without sales against them, internal competition could still build up some pressure. However, since we expect increased inquiries from origins such as Italy in the next few months, the chance of this variant occurring is to be seen as relatively low.

A key point will also be how the market will react to further interest rate steps by the central bank. If we look at the yield curve of the last few years, there is probably still some room for manoeuvre. As the president’s political backing wanes and the surrounding political situation does not get any easier, the exchange rate development will probably continue to be the central and unpredictable element in the hazelnut market. However, as mentioned earlier, the advantage for buyers never weighs long.

A point that should also not be forgotten is that good quality could be scarce for the second half of the season, as a large part of the product had problems during drying.

Exciting times ahead

All in all, we should be in for another exciting few months. Besides the uncertainty about the development of the foreign exchange market, the decision of the TMO will have a significant impact on the market, but also the rumours about the size of the coming harvest, which will probably start in March. It will also be seen if supply can keep up with demand. Likewise, there will again be discussions about frost and disease. There should still be some business outstanding for the second and third quarters. In recent years, January has usually been a month with good demand, so we look forward to the next few weeks with excitement.

Bullet Points

• Very good export figures for December and good domestic sales suggest above-average exports for the season. Therefore, the market may rely on TMO volumes.
• Currently reduced raw material supply due to cautious sellers.
• The last weeks were characterised by little buying activity, but this is normal for this time of the year.
• After stabilisation, the Turkish lira is now steadily losing value again, and the commodity price is rising accordingly.
• Still very large differences in the offers of individual suppliers.
• Market is still in the discovery and stabilisation phase.

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