Price Blockade of the Grain Initiative Will Lead to a Price Volatility

Turkish Hazelnuts: Ferrero Publishes Purchase Bid, the Market Awakens

Mintec Global
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After the very quiet past weeks, the market is now slowly starting to wake up again. Although there are still hardly any enquiries from the Turkish domestic market, interest in the export market is increasing. However, the current enquiries show a rather mixed picture of the buyers’ cover. While some are still looking at the cover for the fourth quarter, many are already only enquiring about the periods from the first quarter of 2023 onwards, although the tendency is not to take out long-term cover. The uncertainties regarding sales and price development are too great.

With regard to the commodity market, there are increasing voices that we are at a crossroads. Local buying agencies are offering farmers prices between 44 – 45 TRY/kg. This is currently the market price and there are also offers in the market based on these prices. However, it has to be said that there is still hardly any raw material flowing into the market, as the bulk of it is still not dried. Also, due to the large price difference to the TMO’s offer (52 TRY/kg), most farmers are not willing to release the commodity into the free market. Even Ferrero’s just published purchase bid could not change the situation so far. With a bid of 48 TRY/kg + 1 TRY/kg quality surcharge, it is also in line with expectations.

So far, the market has remained balanced due to weak demand and low supply. However, since this week, some exporters are back in the market as buyers and the increase in demand for export is likely to tip the balance. The chances are therefore very high that a price turnaround will occur. The question, however, is to what level prices will rise. We hear from farmers that the dates for the delivery of goods to the TMO warehouses are already fully booked until around mid-November. If a lot of goods are dry at the same time and the market price has risen somewhat, some farmers might not take up the appointment and sell on the open market because they do not want to wait so long for an appointment. However, the difference is still too big so far.

Even though hardly any nuts have been harvested from the current crop so far, it is becoming apparent that the kernels are smaller in this crop compared to the last harvest. Thus, the difference between 9-11 mm, 11-13 mm and 13-15 mm could become larger again, after they were quite close in price last season.

All in all, the past season ended quite conciliatory for the exporters. With exports of about 340,000 mt (exact figures were not available at the time), the record export of the previous year was almost reached. However, the exporters are increasingly worried about the coming season and the following season. On the one hand, there is a lack of predictability for sales, as European buyers no longer (can) make long-term decisions. Government intervention in the market, the increasing concentration of market participants, as well as the lack of product development in the face of steadily increasing supply make the market increasingly unattractive in the long run. For the next two years, however, Turkey should still have the sceptre in its hands. After two very good harvests in a row, the probability is very high that the coming harvest will probably be small. Therefore, it is essential what quantity the TMO can buy this year and what quantity will remain on the free market. The first indications of the coming harvest will probably be heard in January/February when speculation is likely to increase strongly during the election campaign. It is therefore important to exercise a certain amount of caution despite the large harvest and weak sales.

Concerning the exchange rate, there are still no significant changes. Exporters are currently not reacting at all to minor changes. The next meeting of the Central Bank’s Monetary Policy Committee is not until 22 September. However, a change in the ECB’s interest rate policy can also have an impact on the exchange rate, so a certain amount of caution is advised here as well.

bullet points
  • Large quantities of dried kernels are still not flowing into the market.
  • (Export) demand is increasing, with raw material supply remaining low.
  • Some exporters are beginning to speculatively build up stocks for the second half of the season.
  • Sales appointments at TMO in high demand.
  • Ferrero’s buying bid is in line with expectations at 48 TRY/kg + 1 TRY/kg quality premium.
  • Core size lower compared to last year. Price differentials between calibres are likely to increase.
  • The exchange rate remained relatively stable again in the course of the week.
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