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Turkish hazelnut market awakens slowly

Mintec Global
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In line with the previous week, this trading week was again characterised by low activity, although we registered a plus in inquiries towards the end of the week. The buying interest becomes more concrete again. Overall, however, the current situation is characterised by the fact that all players in the value chain are living off their stocks. The farmers who still have raw material in stock are holding it and hoping for higher prices. The traders, crackers and exporters are working off their contracts and helping their stock. The importers in Europe are also helping themselves from their contracts. The inventory situation is also good so that no party in the value chain is currently under pressure to trade, especially since the shipping figures continue to be very good.

Exporters wait for TMO

In principle, this situation can remain in this form for a few more weeks. However, if inquiries start to pile up again and market demand for raw material picks up again, prices could rise again. Therefore, the exporters would like the TMO to announce its selling price in advance to have planning security. This is expected to happen in February. However, we can already see that some exporters are in the process of building up their stocks, which leads us to conclude that they expect prices to rise. This is also to be expected against the background of the persistently high inflation in Turkey. The Turkish central bank recently made another significant upward correction to its forecast in this regard. It is becoming increasingly difficult for exporters in Turkey. Complicated financing due to government intervention in the capital market (obligation to exchange foreign currencies into the local currency for a particular portion of revenues) and uncertainty regarding energy supplies are making planning increasingly challenging. However, we are not yet aware of any defaults.

Geopolitical issues

If one would like to venture a forecast for the further development of the Turkish lira, this is impossible for us to assess. Over the weekend, President Erdogan dismissed the head of the statistics authority because the authority would present the situation (inflation) more dramatically than it is. On the other hand, the opposition has been talking for months about an understatement since the actual situation is worse than officially portrayed. We are therefore increasingly concerned about the validity of the data. For example, there were also recent irregularities in the central bank’s balance sheet when, shortly before the turn of the year, it made transfers to valuation accounts amounting to 250 billion Turkish liras, and the central bank thus still ended the year with a profit of a good 60 billion Turkish liras. Money that will flow into the treasury the following year. All of these events do not inspire confidence in foreign investors. But in addition to the economic policy data, it is also the geopolitical issues where Turkey sits in a difficult position. So far, the relationship with Russia has been a very good one. However, since Turkey is pursuing a pro-European course concerning Ukraine and is even supporting it by supplying it with weapons, this relationship is also strained. Thus, Turkey is alienating itself politically from Europe and Russia. A course that is certainly not conducive to economic policy. With the president’s waning popularity, the economic problems, the unrest among the population and an election campaign that has already begun, there is enough potential for reactions that could strengthen the lira but also weaken it. It is therefore not possible for us to make a forecast.

Suppose the TMO does not publish a statement on selling activities in the next few weeks. In that case, the next impulse for the market will probably be the outcome of the next meeting of the Monetary Policy Committee of the Turkish Central Bank on February 17. The first counts in the plantations will start and cause speculation from March on. So, in all likelihood, there will be a few more quiet weeks and then we will see the usual rumour mill for the time of year.

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Bullet points
  • Market participants live on their stocks and contracts, therefore again a quiet trading week, however increasing buying interest towards the end of the week.
  • The market is waiting for the announcement of the selling price of the TMO. This is expected to take place in February.
  • Turkish lira was slightly stronger in the course of the week, commodity prices, however, were slightly weaker, so prices remained almost stable.
  • In terms of foreign and domestic policy, Turkey is facing challenging times, so it is hardly possible to forecast the further course of the Turkish lira.
  • The next meeting of the Central Bank’s Monetary Policy Committee will take place on February 17.