There is no excitement in the hazelnut market at the moment and demand is also subdued, the market has still not found its balance. The reason for this is the market leader’s lack of cover. In previous years, the market leader had already been able to close most of the cover around this time. This season, 35-50% of the cover is probably still outstanding, although this is only a vague estimate. Last week, the market leader was able to cover some quantities after announcing its purchase offer, as suppliers were reliant on liquidity and further financing costs would have led to losses. However, this week the sellers withdrew again. There are currently hardly any deliveries of raw goods to local buying centres by farmers. This is partly due to the poor weather conditions this week. There have been isolated cases of snowfall, which has prompted farmers to stay at home.
Dissatisfaction continues
Overall, there is still dissatisfaction among the market leader’s suppliers when it comes to purchasing bids. The increased costs of the crackers (minimum wage, energy, financing, etc.) are now making themselves felt and it is no longer possible to make ends meet with the market leader’s current purchasing bid as in previous years. The question is whether this is whinging on a high level, as the hazelnut market leader is reacting differently than usual this year, or whether it is actually the pain threshold. Rumour has it that some suppliers are expecting the market leader to have insight/mercy and adjust the offer in the near future.
Price lists continue to vary widely
Looking at the raw material market, prices have risen this week from TRY 92.5/kg to TRY 94.0/kg on the free market. This is due to the market leader’s purchasing bid and the low inflow of raw materials. Nevertheless, the export price lists are on average lower than in the previous week and this with an insignificant influence of the exchange rate. What we are seeing is that the large exporters are tending to adjust downwards. On the other hand, we are seeing upward corrections among the cheapest suppliers, which means that the offers of the last few weeks often contained even more margin than usual. The current wide spread of offers is also significant. Price lists continue to vary widely, even for prompt delivery.
Is the demand as it should be?
In terms of demand, there is interest for later dates in principle. However, the premium due to the financing costs (even subsidised export credits are around 12% p.a.) is so high that this is a deterrent for buyers. There are individual small deals for prompt delivery in the usual daily business, otherwise demand is below average for this time of year.
Exchange rate
There was another surprise on the currency market this week. The Turkish Central Bank surprisingly raised its key interest rate once again, from 35.0% to 40.0% p.a.. Analysts had expected half of the increase. The interest rate is now approaching the level that the population is used to. Despite the consistent actions of the head of the central bank, Hafize Gaye Erkan, the Turkish lira is unable to benefit from this. It is losing value slightly against the euro this week, although this is due more to the strength of the euro than to the weakness of the Turkish lira. In any case, it is interesting to note that the reactions on the financial market to the decisions of the Turkish Central Bank are significantly lower than in the past.
Overall, the mood is currently subdued. Low margins and high costs, as well as gaps in order books, are clouding suppliers’ future prospects. Normally, this should lead to a price correction, but the hazelnut market is currently reacting in the opposite direction, with competitive forces also at work. Accordingly, buyers are currently waiting and watching the market, much to the chagrin of suppliers. This situation is also likely to characterise the coming week.
Bullet points
- Raw material prices are rising again slightly due to the market leader’s bid, especially as farmers are still offering hardly any raw materials.
- Low demand, competitive pressure and gaps in order books mean that some large suppliers are now also satisfied with lower margins. As a result, export prices have fallen slightly on average, although the most favourable offers have been revised upwards.
- Suppliers of the market leader are hoping/expecting an upward price correction.
- The Turkish Central Bank raised the key interest rate by a further 5% to 40%. However, the Turkish lira is hardly reacting to this.
- Despite adjustments, the export price lists remain very heterogeneous.
- The surcharges resulting from financing costs are currently preventing deals for later dates, which is why business continues to falter