Turkish Hazelnut Exporters Position Themselves Differently

We have not seen much trading activity in terms of exports in the past trading week either. However, we are seeing Turkish hazelnut exporters now repositioning themselves for the remainder of the season. The TMO’s tender has changed the situation significantly, making it necessary for many to adjust their strategy. Officially, the TMO does not comment on the motivations of the tender but follows from the actions that the action is not only political in nature but that the “strategic market development” and “risk analysis” components of their own position also play a role.

The result of awarding the quantities of the first tender shows a wide dispersion. Large quantities tended to be awarded to companies that buy speculatively. Companies that are suspected of being undercovered do not stand out in large quantities. All in all, the tender at present, as well as the announcement of the next tender for March, has led to exporters who were counting on prices continuing to rise strongly now having to rethink their strategy. Presumably, at the latest after the tender in March, there will be sufficient goods on the market to be able to close the season. Even if the next tender will be at higher prices, this will only be a small part of the total volume and the market will be able to cope with it.

Basic situation remains unchanged

The TMO is not a market participant that should work profit-oriented. However, we are increasingly seeing that the TMO is having a regulatory effect on the market to limit volatility. This would be the task of the export unions. However, these are at odds with each other and the members favour their own position rather than developing the market strategically.

The basic situation remains unchanged. A growing supply is matched by a barely growing demand. The crop surplus is increasing from year to year, and not only in Turkey. Volatility is therefore not good for sales development, but it is an essential part of the Turkish business model.

Exchange speculation

In recent years, many exporters have made their profits/losses not from traditional business, but through foreign exchange speculation. This has tended to harm rather than help strategic market development: Regulatory instruments, such as the linking of the commodity price to the US dollar, are still not wanted. Currently, only the shortfall in supply resulting from a year with frost has a regulating effect on the surpluses. Statistically, this happens every 10 years and it would be about time again. This is also the reason why some farmers and exporters are pinning their hopes on such an event this year.

The TMO, on the other hand, seems to be rather risk-averse in its position. Although it has an incredibly large credit line due to the financial success of the last few years, the political situation is also pushing it to release liquid funds again. It is also expected that if there is no frost and there will be a normal harvest, it will have to act as a buyer again and increase its own position. Therefore, the TMO now has an interest in putting as much product as possible on the market in order not to let its own position become too large. At the moment, however, this is exactly against the interests of the farmers. They will only be able to sell their goods at reduced prices. This behaviour is correspondingly unpopular with potential voters. However, this is also a damper on inflation in the country.

Stable market expected

All in all, we will probably see a stable to slightly rising market in the next 2-3 months, but no dramatic increase. From the end of April, with the end of the frost risk and the announcement of the harvest estimate in May, the forecasts for the rest of the season will be possible. As the risk of sharply rising prices is now lower, some exporters have decided to stay with the market and no longer take a position. The commodity market is correspondingly stable at the moment. Weak sales and high competitive pressure are putting pressure on prices, and some exporters tend to take short positions.

Concerning the situation in the foreign exchange market, we see increased volatility in the Turkish lira. There are no concrete explanations for this, but there are increasing discussions about postponing the presidential election from May to autumn, as an election in the earthquake zones is currently almost impossible to organise. The inhabitants of the affected regions are loyal voters of the incumbent president. However, crisis management is currently being criticised. This is another factor that will make the outcome of the election very exciting.

Based on the current market development, we see that buyers are increasingly tending not to cover the remaining volumes for Q3 and beyond and to wait and see. Quantities for the second quarter, on the other hand, are / will be covered. Therefore, the market is likely to remain rather quiet in the coming week.

Bullet points

• The TMO’s action is rebalancing the exporters’ strategy.
• Commodity market remains stable and is likely to increase only moderately.
• Competition among exporters has a positive effect on prices.
• Potential frost risk will still hold levels for the coming months.
• Buying interest for the third quarter is increasingly cautious.
• The Turkish lira is behaving more volatile than in the weeks before.

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