Turkish Hazelnut Market: Price Fluctuations, Political Pressure, and Banking Challenges

Although there were no major decisions to be made in the hazelnut market, prices rose significantly in the first half of the week and then fell again from the middle of the week. At the beginning of the week, it was demand and purchases by major exporters that caused prices to rise. The turning point was the publication of the Export Union’s harvest estimate in the middle of the week. This gave a very optimistic estimate of 805,000 mt. To put this into perspective, however, it must be said that this is merely an indication that we should not expect any extremes, either upwards or downwards, in the coming harvest. This first count is based on the number of female flowers on the bushes.

Pressure on farmers?

This does not tell us whether each flower will develop into a fruit. By way of comparison, a figure of 850,000 mt was published at this time last year and the actual figure, without an extreme event, was less than 650,000 mt. The statement should therefore only be interpreted from the point of view of ruling out an extremely small or extremely large harvest. More important is the political statement behind it. By publishing the value, the export union hopes to exert a certain amount of pressure on farmers to sell the speculatively held stocks. In fact, we have seen that prices have fallen significantly after publication, but we also see that there are hardly any sellers at current prices.

Political events

In addition to Ramadan, political events are also dominating local discussions. Regional elections will be held in a fortnight and many market participants are wondering what will happen in the country afterwards. On the one hand, there are positive signals, such as the upgrade of Türkiye’s rating by the rating agency “Fitch” from “B” to “B+”, as the future is no longer seen as “stable” but “positive”. On the other hand, it appears that the Turkish central bank is still unable to get a grip on inflation. Although February’s year-on-year inflation of 67% was within expectations, this is the result of the recent increase in the minimum wage and other measures, among other things. It is therefore possible that further restrictive measures may be taken after the election. Some hazelnut market participants are therefore also assuming that the market leader could become active in the market once again before the elections. The farmers’ propensity to speculate will therefore not necessarily change quickly.

Tightening lending policies

Another important point for the hazelnut market is that banks are tightening their lending policies. The hazelnut market is dependent on bank loans, otherwise the liquidity required for trading would not be available. However, the latest restrictions could lead to certain exporters having to reduce their positions in order to obtain liquidity, which could lead to certain price reductions. On the other hand, those who need liquidity quickly will sell the lots domestically to other exporters, so this may have little impact on the export price lists.

In terms of demand from Europe, there are now some companies that are making their cover for the second quarter. There are also the first tentative inquiries on the market that are already focussing on the coming harvest. However, there are still hardly any suppliers who dare to offer here. What we do expect, however, is that this situation will change significantly in one to two months. The current level is so high that the chance of falling prices tends to be higher than rising prices. We therefore expect many exporters to be very speculative when it comes to marketing the coming harvest in the hazelnut market. At present, however, respect is still very high. An unclear forecast, dry and warm weather, a problem with the marmorated stink bug and unclear political conditions, as well as farmers’ high propensity to speculate, are currently prompting caution.

With regard to the current price lists of exporters, we can say that we continue to see significant differences. However, we continue to see that the deals that have been concluded are often from the inventory positions of individual (European) suppliers and are well below the indications of origin.

In a weekly comparison, there are hardly any differences between the two prices, although the volatility within the week was very high. The same applies to the development of the Turkish lira against the euro.

Bullet points

• Commodity prices initially rise due to the purchasing behaviour of exporters, but fall again after the publication of the first “flower-based” harvest estimate.
• More restrictive lending by Turkish banks poses increasing challenges for the hazelnut market.
• Uncertainty about possible monetary policy changes following the regional elections is fuelling speculation about further possible activities by the market leader.
• The export price lists continue to show a very heterogeneous price picture. The level of current transactions is often well below the current level of the indications from the origin.
• The Turkish lira is stable against the euro this week.

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