Are we already over the zenith, or should we expect prices to rise further? This was one of the dominant questions of hazelnut market this week. Looking at the course of prices, we have now seen only falling prices for several weeks. On the one hand, this was due to the fact that the commodity prices in the origin have weakened, but also that the risk premiums in the calculations have been reduced.
Sellers are silent
Since the beginning of the season, raw hazelnut kernel prices in shell have dropped from just over 100 TRY/kg to around 93 TRY/kg this week. What we are noticing now is that there were hardly any sellers at these prices at the end of the week and prices went up slightly again. This may be related to the fact that the hazelnut market has been waiting for days for the publication of the purchase offer from the market leader. Expected by most market participants a price that is higher than the current level, so hardly anyone wanted to sell at the end of the week.
Nevertheless, one would not like to speak of a trend reversal yet, because one does not know how the farmers will react if the purchase bid of the market leader turns out to be lower than expected. So far, the market leader has reacted prudently so as not to further inflame the market. It would be reasonable if it continued to do so and only met its needs indirectly through other exporters. Both possibilities are likely.
Behavior of farmers?
But not only the hazelnut market leader has options, the behavior of the farmers cannot be predicted at present. It is possible that the farmers will give up hope of rising prices if the market leader does not place a bid on the market. They would then sell the goods in order to enjoy the credit interest on the bank. At about 40% p.a., not a bad option. But it could just as well be that the hope for further price increases is so great that they continue to hold the commodity. Already now there are statisticians who see high chances for a frost in the coming year. Accordingly, the tendency to speculate is high.
Will TMO step in?
The behavior of the TMO is also encouraging farmers to continue holding the commodity. A sale of the TMO could ease the situation massively, but this also depends on the price at which the TMO will then offer the commodity. Currently, there are no signs of an upcoming auction. Many European buyers are not yet fully covered for the season, with the market leader leading the way. Therefore, farmers still expect a good demand that will meet a reduced supply, especially since there is not expected to be much competition from the alternative origins this season. The starting position to profit from the situation in the short term is good for farmers.
Alternatives
In parallel, however, we also see that price lists continue to vary widely and that there are always vendors willing to offer attractively due to the high level of competition in the industry. From other origins we also hear a slight decrease in prices and increasing activity of sellers. Even if this season the other origins such as Italy, but also Georgia are not able to play out their potential, we still see a tendency among buyers to look for alternatives.
Old contracts run the market
A look at the export figures shows that currently mainly old contracts are still being shipped at favorable prices. This is a big loss-making business for many exporters. The losses for many buyers would be correspondingly large if they had to cover at the moment, which is why only the most necessary cover is being provided at the moment. What we are also seeing at the moment is that some exporters are currently building up their inventory. Accordingly, we will probably see some interest in rising prices soon. However, the approach is not uniform, so there are also exporters who are currently accompanying the market.
In sum, we note that there is no single opinion on the market development. The diversity of options and the fact that the emotional mood of farmers is a major factor do not allow a precise forecast. There is a tendency for the pessimistic view to prevail in Türkiye and optimism on the part of buyers.
Currency markets
In the currency markets, we have not encountered any surprises at the moment. Although the Turkish lira has depreciated slightly against the euro in recent weeks, these fluctuations are within normal bounds. The trend here is sideways.
The market should continue to be monitored closely in the coming weeks. We expect hardly any changes for the fourth quarter, but the prerequisites for the first quarter are now being laid.
Bullet points
- Commodity prices, as well as export price lists, continue to soften. (partly this is a catch-up effect from last week).
- The market leader continues to show restraint and has not yet positioned itself publicly. The hazelnut market is urgently waiting for a signal here.
- There is disagreement about the further development.
- The TMO continues to be unresponsive to exporters‘ pressure.
- Turkish lira continues to trend sideways with some volatility.