Hazelnut Market Leader Maintains Power Game Against Suppliers

Contrary to our forecast, there were a few events this week that had an impact on the hazelnut market. For example, there was an initial correction in export price lists right at the start of the week after it was announced that the rise in consumer prices in the USA was slowing, despite stable growth. Analysts therefore do not consider a further interest rate hike by the Fed to be likely. As a result, the euro appreciated, which also had an impact on the Turkish lira. This lost around 2.5% in value against the euro over the course of the week. The question is whether this is only a short-term situation until the European Central Bank – ECB announces further steps at the beginning of December, or whether this level will remain. In any case, the situation has been received very favorably by the market, as this was not expected.

In addition to the events in the foreign exchange market, a lot has also happened in the hazelnut market. For example, the market leader improved its purchasing bid a little, but only for the lower quality lots (from 93 TRY/kg to 94 TRY/kg). The bid for A qualities remained the same at 95 TRY/kg. This therefore had little impact on prices. The behavior of the market leader is very interesting in that it is not going for a break and securing a large quantity with a high bid. Rather, it seems to want to play the power game with the market and take the risk that if this fails, it will have to pay more later. At the moment, however, it almost seems as if its strategy is working. Leader continues to signal to his suppliers that a further price increase is unacceptable and that there is a certain buffer.

For suppliers, it is the cost of capital that makes it uneconomical to hold stocks for longer. They are therefore passing the pressure on down the value chain in the form of lower purchase bids to the farmers. Prices have therefore actually fallen slightly this week. However, it should be put into perspective that hardly any volumes are still flowing onto the market and the market price quoted is based on a small number of transactions. In our opinion, it is still too early to speak of a trend reversal. Unlike traders, farmers have no financing costs to put them under pressure, so they can continue to hold back goods with peace of mind.

In addition to updating the purchase offer for kernels in shell, the hazelnut market leader also announced its purchase offer for natural kernels. At 195 TRY/kg, this is the same for kernels calibrated 11-13 mm and 13-15 mm. On the free market, prices were recently < 190 TRY/kg, so this is a price that crackers can basically work with in order to have capacity utilization in the factories. However, this price is also below the original expectations. The next two weeks will show whether the market leader can assert its position on the market with this strategy. Market participants are now monitoring the situation very closely.

Cost of capital – buyers withdrawing

The weakness of the current export figures is also increasingly being discussed. This is not yet causing any nervousness on the market, but it is another argument in favor of buyers, with one of the strongest factors currently being the cost of capital. Therefore, prompt shipments with short payment terms continue to be significantly cheaper than deliveries at later dates. As capital costs have never been factored into the calculation to this extent in the past, prices for later dates are deterring buyers. As the major sellers are not yet prepared to make speculative advance payments in this respect, business is still not getting off the ground. In general, we still see hardly any sellers willing to bet on falling prices. There is too much respect for a turbulent spring. Rumors about the size of the coming harvest, the upcoming local elections and the weather are causing a certain amount of caution in this emotionally heated environment, especially as many sellers have already made a loss on contracts concluded in the run-up to the harvest.

In the coming week, we will have to observe what volumes are offered to the market leader. We also hope that the price lists will become somewhat more homogeneous again. In the past week in particular we have noticed an increase in differences again. While some suppliers react quickly to changes, others remain unchanged for a long time.