After the last week of the year ended on a conciliatory note, the tide turned this week for the hazelnut market. There were still attractive offers at the beginning of the week. Towards the middle of the week, however, the situation began to change. At the end of December, there were still sellers of raw materials who needed liquidity, but now there are hardly any sellers left.
As some exporters are currently buying raw goods, prices have risen sharply within a short space of time. Two weeks ago, prices for hazelnut kernels in shell were still around TRY 96/kg (€2,94); at the end of this trading week, there were deals at TRY 110/kg (€3,37).
Will price increases continue?
The price increase will only come to the attention of many buyers next week, as many buyers are currently living “from hand to mouth” and will have to make smaller cover purchases in the coming weeks. The question that can be asked in the hazelnut market is whether this will be a temporary peak or whether the price level for this season is now fixed. The situation cannot yet be precisely determined, as the volume balances have not yet been finalized. There are still no official figures on the actual size of the harvest and what quantities are on the market. On the other hand, there is also the question of whether the volume balance is relevant at all.
The price increase that we have seen this week has the following reasons:
- Farmers are not selling the stocks and will probably hold them for another 4 months or so.
- The (commodity) traders and crackers have bought certain quantities and only want to sell if the costs (primarily financing costs) and a certain margin can be realized. The same applies to exporters.
- The TMO has still not given any signal for a possible sale. However, pressure from exporters on the TMO is increasing.
- Sellers are expecting a certain level of demand in the coming weeks. The market leader is also not yet fully covered.
High inflation rate
The increase in prices is also due to the generally negative mood in the Turkish economy. Inflation is still rising slightly at a level of over 60%. Although the Turkish central bank has been able to stabilize the exchange rate somewhat through its measures, the challenges remain high. Most recently, the key interest rate was adjusted again in December by a further 2.5% to 42.5%. This means that the key interest rate is slowly moving into the range that has recently been practiced in the private sector. The end of the interest rate hike in Turkey has probably not yet been reached, as the inflationary spiral continues.
Significant increase in minimum wage
For example, the minimum wage was once again raised significantly from around TL 11,400 to TL 17,000 per month. Massive increases in production costs, crushing financing costs, low margins, high risk and sluggish sales are causing the worry lines on exporters’ foreheads to grow ever larger.
As the first week of the calendar is traditionally very quiet in Europe due to vacation days, the coming week should bring some movement to the hazelnut market. It will then also become clear whether the indications will hold, which unfortunately the majority currently assume, provided the TMO does not release any volumes onto the market. Some new statistics should also be available next week to make an assessment of the situation a little more objective. All in all, the year is unfortunately starting with some frustration. Next week’s price lists in particular will probably shock some buyers.
Bullet points
- Significant commodity price increases (approx. 15%) resulted in adjusted export price lists at the end of the week, albeit with low trading volumes.
- The reason for price increases continues to be the reluctance of farmers and the massive rise in costs in the Turkish economy.
- The Turkish Central Bank has raised the key interest rate again by 2.5% to 42.5%, but inflation remains very high.
- The exchange rate remains stable.
- Buyers’ first reaction to the price increase is a lack of understanding.