Last week also did not bring a turnaround in the market. There is still little demand, and exporters are finishing the season. However, it could be observed that raw material prices increased slightly. The reason for this is the assumption that the 2022 crop will be traded higher than the current one. Therefore, just before the end of the season, the level begins to equalise. It could also be observed that more and more sellers withdrew during the week, as the visit of President Erdogan was expected on Saturday and with it the announcement of the official purchase price of the TMO.
On Saturday evening, it was then so far. President Erdogan announced during his trip to Ordu a purchase price of 52 TRY/kg (plus the existing area premium). As a comparison, the current harvest is currently traded for about 42 TRY/kg. While most farmers welcome the price, we hear different voices from exporters. Those who have acted cautiously and built up stocks also include the price. However, many exporters had expected a price between 48 and 50 TRY/kg in the last weeks. The current price thus represents a risk of loss-making business for most pre-sales, should the exchange rate remain at the current level.
The next important step, which is still pending, is the announcement of the purchase price of the market leader. Most voices in the market expect the market leader’s price to be 50 TRY/kg and the free market to settle around 2 TRY/kg below that. As we have seen in the last season, the bid of the market leader is a significant factor in how the volume flow to the TMO will be. In any case, the latter is ready to purchase another 200,000 mt.
As many buyers are not yet active due to the vacation season, we do not expect the situation to change much in the coming week. As a first step, we expect prices to adjust upwards. This will be felt primarily in the natural cores. We do not expect the prices to develop so strongly for the preparations. On the one hand, there are still large surpluses and intense competition. In addition, the core size distribution of the coming harvest has not yet been determined.
In terms of the exchange rate, no profound changes are expected either. The Turkish central bank has not touched the key interest rate, and the massive interest rate hike by the U.S. Federal Reserve has also led to hardly any swing in the exchange rate. Therefore, the coming week should be a time of orientation. However, we must expect a significant increase in prices, which is above the expectations of many buyers.
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