In the past trading week, we saw the Turkish hazelnut market get moving. The extremely positive harvest estimate published on the INC had an impact and caused prices to fall significantly right at the start of the week. It must be said, however, that not all suppliers revised their price lists downwards. We also saw that the trend began to reverse again from the middle of the week.
There were several reasons for this
- Many market participants do not trust the harvest estimate, so they want to wait until the development of the vegetation has progressed a little further.
- The second reason is the behavior of the TMO.
From the first sales round, there are only contracts for less than 1,000 mt. The next sales round is expected to take place at the beginning of June and the sales price is expected to be higher than before. According to some experts, the market is expected to need around 30,000 mt this season. The scenario that this quantity will have to be bought at prices significantly above the current market price has also caused a certain amount of caution among some sellers.
Enough quantity?
In this context, it should also be noted that the supply on the free market is limited in terms of the available quantity. Even small purchases can therefore have a certain corrective effect. Another thing that should not be forgotten is that almost all traders who accept goods on a commission basis want to have settled the goods by the end of May. It appears that a significant proportion of the goods have not yet been settled, which is why the interests of farmers and traders are currently clashing, causing movement in the market.
We are receiving positive signals from buyers regarding the development. Many had already given up hope that anything could change. In addition to some short-term purchases, however, we are currently seeing a trend of buyers continuing to refrain from entering into long-term contracts in the hope that prices will continue to fall. This hope is seen very differently in Türkiye, which is reflected in the offers regarding the 2024 harvest. While some exporters are offering prices below the current level, others continue to be very cautious.
Production costs
The dilemma Türkiye finds itself in is that production costs have also risen sharply due to inflation (e.g. wages for harvest workers, pesticides, fertilizers, contract services during the harvest, etc.). Although inflation is falling, it is still well above 50%. While the western growing region can operate much more efficiently, the opportunities in the main growing region on the eastern Black Sea coast are limited.
- The topography,
- An overaged shrub population,
- Mostly poorly trained farmers,
- The impossibility of mechanization.
These factors ensure that the main producing region has the worst efficiency and therefore high production costs.
If the TMO wants to provide the farmers with an income that ensures the preservation of cultivation in the region, it probably has no choice but to continue to make high purchasing bids, which the market leader must also follow. However, this is the instruction to promote alternative origins. The most important producer country for hazelnut kernels is therefore facing a strategic dilemma.
We do not expect the situation to change significantly in the coming week. Overall, the market is now moving towards the 2024 harvest. Many buyers are actively inquiring, but still without any actual buying interest. Currently, crop estimates are still being verified in Türkiye. Only when these are known will some large exporters position themselves, which should then be the next milestone before the TMO’s purchase price is announced at the end of July.
In terms of the exchange rate, we are seeing a slight recovery in the euro, which has put some pressure on the Turkish lira, but has only had a minor impact on export price lists. All in all, the trend here remains rather stable, i.e. not a factor on which exporters (should) speculate.
Bullet points
- Positive harvest forecasts are putting pressure on prices for the time being, causing nervousness among sellers with a long position.
- However, the price correction is not as strong as expected, as it is assumed that the market will still be reliant on TMO stocks and that these will be offered at a higher price.
- The focus is now increasingly shifting to the 2024 harvest. In addition to the usual speculative offers, it can be seen that most exporters have not yet taken a position in this regard.
- The TMO will probably stick to its “high price policy”.
- There was also little change in the exchange rate.