Turkish Hazelnuts: Very Good Export Numbers, but Low Demand

In terms of demand, the trend of the previous weeks remains low. European buyers are living off their contracts. If there is any covering, it is for the second quarter. There is still very little buying interest for the third quarter. However, the subdued demand should not hide the fact that exports are still going very well. By the end of February, more than 220,000 mt had been exported. It is slowly becoming clear to most that the exporters will probably manage to market this year’s entire crop and that the market will have to fall back on the stocks of the TMO. However, there are still sufficient quantities on the open market and due to the lack of demand for the third quarter, the TMO has not yet managed to sell any significant stocks. A further tender is to be issued at the end of March. The market leader has also not yet become active and is still waiting to cover the last demand for this season or has already bought through other exporters. This remains unclear.

However, the main focus of most buyers this week was on the political level. To the surprise of many observers, the Turkish lira held quite stable against the euro, despite the Ukraine/Russia crisis and the data from the economy. On the one hand, there was very positive news, as the Turkish economy grew by 11% last year. This is the strongest growth in more than ten years. However, in particular, inflation is driven by Turkey’s idiosyncratic monetary policy and is weighing on the economy. For example, inflation for February was now above the 50% mark for the first time compared to February last year. Nor are there any prospects for a quick recovery, as energy prices, particularly, continue to rise sharply due to the current crisis with Russia. Turkey gets about 40% of its natural gas imports, about 50% of its oil imports and about 75% of its wheat imports from Russia. It should also be mentioned that 25% of tourists come from Russia and Ukraine. For this reason, among others, Ankara now has to perform the feat of a tricky balancing act between the West and relations with Russia. Turkey’s dependence on Russia is self-made, as the president has long boasted of his good relations with the Kremlin. But his offer to play mediator was also rejected. In particular, the situation in Syria could become critical for Turkey and Europe. If Moscow wants it, a further flow of refugees from Syria to Turkey can be provoked. Domestically, this is already an irritant in politics. If there is a new wave, heated negotiations between the EU and Turkey will likely ensue. Turkey condemns Russia’s actions but still calls Russia a friend. At some point, however, Turkey will have to show its colours, and then it will become clear in which direction the course of the lira will turn.

On a side note, the Minister of Agriculture was also replaced this week after disagreements over the state purchase of vegetable oil. However, this should have no impact on policy in the hazelnut market.

All in all, we saw a further softening of prices this week for exports. Raw commodity prices went back down a little again. However, not all suppliers followed suit, so the individual exporters’ offers are again somewhat further apart than before. For the coming week, we do not expect any severe change in the demand situation, but we do expect a change in the risk assessment of purchasing. It is quite conceivable that some companies will now cover most of their raw materials instead of continuing to wait, as the coming months are characterised by general uncertainty.

Bullet points

• Raw material prices continue to decline slightly due to lack of demand.
• Export figures remain at a very high level.
• The Turkish lira is surprisingly stable in response to the crisis in Ukraine/Russia.
• The West is closely watching turkey’s political balancing act. The situation is unstable.
• It remains to be seen whether buyers now tend towards more security due to the changed environment or continue to prefer the wait-and-see attitude for the third quarter.

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