Turkish Hazelnuts: Government capital controls urge exporters to be cautious

In terms of the commodity market, the hazelnut market remains in hibernation. There is hardly any activity left in the market as exporters are well covered and have good stocks. Accordingly, prices have also been slightly down this week. In contrast to commodity prices, there was a significant increase in export prices this week, which, however, can be explained purely by developments in the foreign exchange market.

The Turkish government has defined a series of measures to stop inflation and stabilise the Turkish lira. Economists, however, see the measures as very critical. For one thing, the monthly minimum wage was raised by about 30% to now 5,500 TRY. This increase will also be reflected in the cost structure of exporters. Rising energy, transport, packaging and now also labour costs are driving up export prices significantly. Apart from this measure, it is mainly the interventions in the foreign exchange market that are worrying exporters. Almost half of all foreign exchange earnings must now be immediately exchanged for Turkish lira. This hits exporters particularly hard, as currency speculation is an essential part of their business model. Access to credit is also more difficult, which can tempt exporters not to cover positions. Even though the opinion of almost all market participants is that the Turkish lira will weaken in the long term, there is a lot of uncertainty about the development in the coming months. President Erdogan may once again reach into his bag of tricks and come up with unconventional measures to support the national currency to look good before the elections. This realisation has now led some exporters to act much more conservatively than in the weeks before.

We also expect a quiet market in the coming week. As of 8 July, most factories will be closed for the Islamic Feast of Sacrifice. As the school holidays have also started, many players will be on holiday. We do not expect any increase in demand from Europe either. The next impulse will be the announcement of the TMO purchase price in mid/late July.

bullet points

• Commodity prices continue to decline slightly as there is hardly any demand.
• There is a slight increase in export prices due to the exchange rate.
• Exporters’ risk appetite declines due to government intervention in the capital market.
• Seller market remains very inhomogeneous.
• No change in the market situation is expected for the next two weeks.

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