Hazelnuts, Market Update 01.08.2022

Turkish grain board (TMO) announced their purchase prices of in-shell hazelnuts based on 50% yield for crop 2022/2023.

When it is considered together with the support payments (area–based, diesel and fertilizer) to be given by the ministry to the producers, the average price will be TL 54/kg. as in previous years, the goods with better yield will also be paid extra this year.

Regarding the crop size in Hazelnuts in Turkiye, there is the typical assumption that there is generally an alternate bearing trend which would suggest that after a large crop, the trees require an “off” year in order to recuperate. These “off” years are then usually followed by another larger “on” year, with crop sizes swinging between 10-40% year on year. As you can see on the table below that using the typical alternate bearing trend, we would have expected a crop size of anything between 670k MT – 720k MT,

After looking at the fields and doing analysis on the trees, many observers that the 2022 crop appears to be particularly impressive with the announcement last week from the Hazelnut Exporters Union in Giresun giving its updated estimate of 830k MT. The reasoning for this appears to be that as the currency in Turkey continues to devalue, many Turkish growers have invested more resources into preserving their trees and making sure every hazelnut has the best chance to grow to the best of its potential. This, coupled with optimum weather conditions through the growing period has lead to what seems to be a superb crop. We can say that even we do not beat last years number of 800k, it is still an impressive showing during an “off” year.

TMO

Today the TMO announced a purchase price of 52TL for in-shell Hazelnuts for the 2022 crop in order to help protect the growers from falling prices in the face of a generally bearish outlook. Before the announcement, the market was trading around 45TL but as this increase was generally within expectation, we have not seen a dramatic movement as of this morning. We can say with some certainty that this announcement will help prevent a price crash, but it may also cause an oversupply situation if customers refuse to meet these levels. With 2023 being an election year, it would be important to consider that TMO’s work for the 2022 season is unlikely to be done, and we can expect more activity in the future. 

Demand

As of the End of June, Turkey has exported 301k MT (approx. 21% more than at the same point last year. While this looks impressive, it represents a similar increase in the crop size, so we can say it is in line with expectations. Going forward with another big crop on its way, as well as a large crop is coming from Italy (130k as opposed to only 50k last year), the outlook does look gloomy, especially with probable price increases from TMO. As well as this, it is likely that with a weakened EURO and a potential energy crisis in the key winter months, the general consumption of hazelnuts is likely to be down across Europe. It’s also important to add that with inflation soaring in Turkey, the domestic consumption of Hazelnuts has fallen dramatically, adding more pressure on export markets to take the lion's share of the crop.

Turkish Lira and other factors

The most unpredictable of factors, as it has been over the past few years, is the Turkish Lira. Most expect 20TL v USD by the end of Q4, however, there is always the possibility of additional economic levers being pulled in order to correct the TL with dramatic force. This, along with the continuing risk of the situation in Ukraine across the Black Sea, means that there may be factors unknown to us today which could dramatically change the shape of the Turkish economy as a whole.