Hazelnuts, Market Update, June 2022

Although the TMO raised the stakes in the third round of sales by demanding a price of TRY 44.00/kg for in-shell hazelnuts, exporters in Turkey are shocked to find that the state-run organization successfully attracted buyers mad enough to pay such a price. While speculations are running wild in Turkey as to what prompted such a run on the TMO, it is next to impossible for suppliers to set the right prices for the new season.

Speculations dismissed

The market jumped at the fact that the TMO managed to sell the entire 18,000 mt in the last round of sales, meaning that its warehouses are now empty. This is, however, not the only surprise. The issue is that most buyers were regular cracking factories, who, unlike exporters, do not have to meet existing contracts. Speculations are running wild as to what prompted these crackers to buy from the TMO.

Several guesses are highly improbable. The most reasonable explanation is that crackers simply expect raw material to rise, especially if the TMO decides to offer growers a high buying price at the start of the season in the run-up to the 2023 presidential elections. As there are no aggressive buyers in the market at present and factories are struggling to sell raw hazelnuts in size 13-15 mm it is unlikely that crackers have to cover existing contracts. A possible supply squeeze can also be dismissed as the season is nearing its end, exports have progressed normally so far and there is no need for additional supplies. Another guess is that manipulators are at work claiming that the crop will be much smaller than anticipated. However, growers state that prospects are still very good and that there is no reason to believe the contrary.

Prices vs demand

The paradox is that while the market has jumped at the fact that the TMO succeeded in selling its supplies, demand is frustratingly low. By contrast, domestic and export demand is remarkably low, with suppliers reporting that overseas customers have no intention of buying. The Turkish lira is also far from helpful, especially since president Erdoğan has recently stressed that he has no purpose in adhering to common economic sense, which sent the lira tumbling. For international buyers it, in other words, makes more sense to wait for the lira to depreciate further. While the prices for natural kernels have remained firm this week, the prices for preparations such as hazelnut meal have declined in recent weeks.

Similar trend for new crop

Although the prospects for the new crop are highly encouraging, suppliers in Turkey and Italy are voicing similar concerns regarding prices. Many suppliers in fact prefer to wait before issuing offers not only because the hazelnuts have not been harvested yet and drying holds its own challenges for the market but also because of the current economic situation. With the costs for fertilisers and fuel on the rise it is for instance difficult for leading producers in Italy to set sustainable prices for 2022/2023 as local media report.

Inflation and the rising costs of living are also an international problem, which is expected to reduce demand for non-essential goods such as hazelnuts. The depreciation of the Turkish lira generates additional uncertainty in Turkey. Although demand for the new crop is also very much subdued at present, the prices that have been issued in Turkey so far are following a similar track as the prices for the 2021 crop. While the prices for natural kernels have remained firm in recent weeks, the prices for preparations such as hazelnut paste have declined.