Hazelnuts: What Does The Market Leader?

As expected, exporters’ behaviour was still somewhat reserved at the beginning of the week, as they first had to come to terms with the new circumstances. However, no tension was noticeable either on the part of the customers or among the sellers, although most of them had not expected a price in the order of magnitude. Above all, many buyers currently still lack the belief that this can be implemented in the market.

On the sellers’ side, despite the known facts, they are still not aggressively selling. The last piece of the puzzle still missing is the announcement of the purchase price of the market leader. Most market participants would like this to be around 50 TRY/kg, slightly below the TMO’s 52 TRY/kg. A price of 47 – 48 TRY/kg is then expected as the price in the free market. However, some sellers have already been selling based on 46 TRY/kg this week. The market leader also registers this. Therefore, there is a risk that the latter will set its bid even lower. This would lead to farmers selling more of their products at the TMO. We saw the same thing last season and the price-increasing effects of TMO sales. However, it must be said that this year there are alternatives to Turkey, as the origin, Italy, will again be on the market with a good harvest. Considering two big crops in a row, it can also be in the sense of the TMO to withdraw goods from the market this year to put them back into the market next year. In addition to the political dimension of action, there is now also an economic dimension to the action. This is also favoured by the propensity to speculate in the market has declined massively. Many people cannot afford to hold prominent positions, for example. If financing is done in local currency, the amount of money for the same amount is many times higher, and interest rates remain high. In addition, there is little chance of significant price increases in the short term, as ample supply meets subdued demand. Foreign currency financing is also out of the question for most (except exporters). For one thing, there are specific capital controls, and the interest rate level is no longer as attractive due to the recent interest rate moves, especially since there is also an exchange rate risk, depending on the design. So it’s not a year of speculation for the minor participants, which is good.

Overall, we have seen that old crop prices have risen significantly this week. This is due to the large delta to the coming crop, and many exporters have once again bought goods from the old crop. These are used for the production of preparations. Therefore, the price increase will probably not fully affect these products. This is due to healthy competition among exporters.

In terms of exports, about 322,000 mt were reported for the month o July. This means that around 335,000 – 338,000 mt will probably be exported at the end of the season, which will be slightly below the record of about 343,000 mt of the 2019 harvest. Exporters have thus managed to market the majority of the crop and keep surpluses low. Given the general reluctance to buy, we do not see this scenario for the coming season.

Regarding the exchange rate, there were no noteworthy events. The Turkish lira fluctuated within a normal range. Also, reports of high inflation of around 80% in the country are no longer a cause for alarm. One should enjoy the whole nevertheless with particular caution. The latest polls indicate President Erdogan could face defeat in next year’s elections. One must therefore expect that he will resort to unconventional measures to increase his popularity. This may also impact the exchange rate (in the short term).
For the coming week, we still expect a quiet week. We expect a revival around mid/end of August at the earliest.

• Significant increase in raw material prices in response to the new government purchase price.
• Sellers are waiting for the purchase bid from the market leader to estimate the price in the free market, but first sellers are already active.
• This season will likely end with the second highest export numbers to date.
• Low speculative tendency of sellers expected for the next half year.
• Hardly any changes registered in the exchange rate.

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