This week, the hazelnut market again waited in vain for a determination of the market leader’s further purchasing strategy.
Why is this decision so important?
In Türkiye, almost every third hazelnut goes through the books of the market leader. Its business model is based on the hazelnut and it can be assumed that it has to buy no matter what the price is. Unfortunately, this is also the “proud” and not very farsighted opinion of many sellers. According to the information we have, the market leader has so far only been able to cover a fraction of its annual demand.
Why is this so?
In the last few years, the market leader always submitted a purchase bid that was significantly higher than the market price. This made it possible for it to buy large quantities in a short time and then relax and watch the rest of the season. This year leaders purchase bid is so low that it has only been able to buy small quantities.
The question we ask ourselves is whether the market leader has simply misjudged the course of the season or whether certain agreements already exist in the background (e.g. contracts with other exporters about deliveries, or agreements with the TMO, etc.) that are causing him to act so cautiously at the moment. After talking to some of his suppliers, we tend to think that the season was indeed misjudged and they are now discussing how to proceed. In any case, the suppliers remind us that if the market leader wants to buy large quantities in a short period of time, it has to present a bid that is significantly higher than the current level so that there are enough farmers to part with the goods. Therefore, most sellers are currently holding back war, as they are counting on a price increase in the short term. This would destroy any hope of relief, at least for the fourth quarter.
Short term purchases
However, there are also other opinions in the market. There are still rumours that TMO could announce a sale this year after all. Also, only some of the players are working with the market leader. The rest have to find their own way.
Since the majority of the industry has so far only covered Q4/2023 and partly Q1/2024 and cannot currently be persuaded to cover more, there are still large gaps in the order books for the coming year that need to be closed. It will now depend on how the industry deals with this and how much the sellers are prepared to make concessions in order to keep the factories busy. However, we currently see a tendency for the market to continue to act only in the very short term. On the one hand, there is a lot of uncertainty with regard to sales figures. Not only the prices, but also the warm weather in Europe are weighing on the consumption of certain products, and at the current level, caution prevails.
Exchange rate
In addition, the crisis in the Middle East adds another factor of uncertainty that may also affect the exchange rate, despite the return of the national bank to a textbook policy. Looking at the development of the Turkish lira in recent weeks, it has tended to move sideways, but the tendency is more towards weakness than strength.
Although this week we have seen a slight increase in prices due to the increasing restraint of sellers, it is still the case that the exporters’ price lists show massive differences. It is still worth comparing.
A look at the export figures shows the same picture as in the previous week. Good export figures with slight price increases compared to the previous week, which shows that new contracts are now increasingly being added to those concluded in the run-up to the harvest. This also means that the current level is now increasingly entering the market. What we are also seeing is that stocks in Europe are relatively tight at the moment, as hardly anyone wants to hold large stocks at this level and due to the uncertainty.
Bullet Points
- Commodity prices rise slightly again as sellers pull back in anticipation of a higher purchase bid from the market leader.
- The hazelnut market leader continues to exercise restraint and has not yet taken a public position. However, the majority now believe that the market leader has misjudged the season’s performance.
- The pressure on the TMO to part with goods before the start of the new year is still high, but there is no statement on this yet.
- Export price lists are still very heterogeneous. It is worth comparing.
- The Middle East conflict holds additional potential for uncertainty with regard to the development of the Turkish lira. So far, however, the development is still rather sideways.