Turkish Hazelnuts: Frost Damage Divides the Market

This week’s dominant topic is the possible frost damage in the Turkish growing areas. While the topic is being discussed intensively in the Turkish domestic market, European buyers are hardly involved in the discussion and are relaxed about the outcome. This is mainly because they can mainly use existing contracts and there is hardly any demand for further quantities. Although one has the impression that the market is very quiet, this is only partly true. At the end of March, exports were already just below 250,000 mt and the season still has five months to go. Depending on whom you ask, between 335’000 and 365’00 mt are expected for this season. This season will be one of the two best in Turkey’s history in terms of export volume. Exports are also very much driven by the market leader at the moment and large volumes are being traded towards Italy, as this origin has an excess demand due to the very small harvest.

In contrast to other years when nights with frost were massively used to set the mood, we see a completely different way of dealing with it this year. While some exporters say that there was no frost damage to the bushes, others expect a reduced yield of at least 10-15%. While there was at least agreement on the yes or no of damage and only the amount was discussed in the past, this time we have completely contrary statements about it and thus also about the possible price developments of the new crop. This also confuses the buyers, as they are currently receiving recommendations to cover on the one hand and on the other hand the information to rather wait because the prices would fall. Looking at the facts, it remains to be said that there was indeed a long cold spell with frost and snow for the month of March on the Black Sea coast. This is unusual, especially for the western growing regions. In an initial assessment, indications of damage were found. However, whether this will prove to be true will only be seen in about 14 days. Currently, the temperatures are above 20 °C again and vegetation is progressing. In addition, there is usually a correction of around 10-15% between the first flower estimate and the first large fruit set count for the official harvest estimate of the export union. This also relativises the sawing out about possible damage.

We have indications whose validation will be available in about 14 days. Actions on this are speculative. Hence the different behaviour of the exporters about this, but this can also provide information about how they are oriented. As it looks, we have some exporters who have built up stocks speculatively and others who are going “short”. Accordingly, there are also other intentions for selling. We continue to see this in the price lists. Especially with the preparations, there are massive differences between the individual suppliers and we also see enormous differences in the offers for the sales of the 2022 harvest.

However, we suspect that we will only have a clearer picture of the situation after publishing the harvest estimate at the INC. There are still about six weeks until then. This is because it will also be important for the forecast whether the harvest in Italy will be in the normal range again this year or whether there will be a smaller harvest there. Since the vegetation in Italy iTurkishgs about four weeks behind that in Turkey, there is no reliable information yet. Basically, for the exporters, it is a question of how the stock situation will be next season and what surplus they will start the new season. As it looks, the exporters will succeed in marketing the entire quantity of the 2021 harvest, possibly even a little more. This means that we will start the new season with a stock of 50,000 – 90,000 mt. In a normal year with moderate prices (this can be assumed), an export of 300,000 mt can be expected, corresponding to 600,000 mt of kernels in the shell. In addition, there is a domestic consumption of about 120’000 mt of kernels in the shell. This means that any harvest estimate below 720,000 mt will probably result in a reduction of stocks. Therefore, some exporters are already sensitive to the 10-15% reduction, as this would correspond to a harvest of 670,000-710,000 mt in relation to the first estimate based on the flowers. This would lead to higher prices and lower export volumes. So far, however, the market is unexcited on both sides and that is a good thing.

In any case, the uncertainty has already led to a slight increase in raw material prices. In addition, the TMO has announced its selling price for April at 41 TRY/kg. This is higher than the current free-market price of about 39.5 TRY/kg. The coming weeks will show whether the market will follow the target or whether, as recently, there will be no interest in the commodity for the time being.

The fasting month of Ramadan begins today in Turkey. However, we do not expect any effects on the hazelnut market, as this does not fall in a harvest season or a high season.

Apart from the developments in the commodity market, one should continue to closely observe the development of the exchange rate, as this has been the defining factor for prices in recent years. Although the Turkish lira has been very stable by its standards over the past few weeks, its future course should be uncertain. While making certain forecasts about commodities is possible, these are not possible about the exchange rate. They can also be so large that all predictions about the commodity become obsolete.

bullet points

• Conflicting reports on possible frost damage divide the market
• Uncertainty causes commodity prices to rise slightly, but export prices remain quite stable
• The Turkish lira has also been relatively stable for weeks
• Export and domestic demand still subdued
• Export figures, however, still on record course
• Still significant differences in the offers of the various suppliers

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