Turkish Vine Fruit Update March 2020

Export/Registration Numbers & Raw Material Information

We have continued to see downward pressure on Turkish prices. Key indicators below go some way to show why:

• Exports are down 9.1% year on year for September 2019 to end February 2020.
• Export for February alone was down 17% Y-o-Y (2019 – 19,500 tonnes & 2020 – 16,540 tonnes).
• Bourse Registrations are up 12% for September to February Y-o-Y.
• 73% of this year’s crop has been registered at the bourse, whilst only 45% has been exported thus far.

• The following statement was made in January and still stands true: If exports carry on at roughly 18,000 tonnes per month (the average for Jan to August over the last 2 years) then exports will total somewhere around the 240,000 to 250,000 tonnes for the 2019 crop at the end of August. This is on par with 2018 crop (252,450 tonnes exported) which as we know was smaller in estimation, meaning a significant carryover of stock into the 2020 crop (circa 25,000 to 30,000 tonnes assuming domestic usage is about 30,000 tonnes per year).

Registrations have continued to slow compared to the figure for end December of 23% down at that point. An increase in registrations was always expected when faced with an increase in crop (on estimation) of 17% Y-o-Y. Over the last month we have seen prices for STD 9s decrease from 9.5 Turkish Lira per kg to around the 9.25/9.3 TL/kg.

Lira Weakness, Economic Situation & Regional Instability

The Lira has had a rather dramatic month since our last report with a starting point of 5.984 with a low of 5.969, a high of 6.259 and a close around the 6.189. Economists in Turkey are putting this down to a couple of things:

• The uncertainty of what the country intends to do in Syria, something which drastically escalated last week with the deaths of 34 soldiers in an airstrike.
• On 19^th February the Turkish Government cut the interest rate from 11.25% to 10.75%. This immediately had a negative reaction on the value against the USD. The next meeting to discuss the interest rate is on 19^th March.

At the beginning of this week the rates the Turkish banks are looking to charge for lending both Euros and US Dollars is a lot more volatile than last week, Instead of a much more flatter 1%/3% Euro/USD we’re now seeing Euros between 1% to 1.75% interest and US Dollars 3% to 3.5% interest. The impact of this has yet to fully take affect on prices.

Worldwide Competition

With the border between Iran and Turkey having movement restrictions, due to the Coronavirus, the flow of Iranian fruit from the Southern port of Mersin has slowed dramatically. Not all shipping lines call in Iran and as such they truck product to Turkey to be exported via Mersin. This initially caused traders/farmers in Turkey to look at increasing their raw material cost as they felt demand in Turkey would take a spike upwards as many customers in Holland look to Iran and China for material for further processing. China is obviously still facing it’s issues with exports due to restrictions on factories working, ports on go slow and government offices not all being open.

Prices from California are continuing to be aggressive in the face of readily available raw material. Prices are now equating to $2150 C&F inclusive of duty for Thompson Select Raisins with their South African equivalents at $1850 C&F per ton. South African crop suffered a little late rain and the overall quantity might not be quite as big as people are expecting but this information is developing all the time. We hope to update this early next week after our colleague has returned from his week in South Africa visiting the Vineyards and processors.

Overall Summation

With raw material prices taking a slight dip since our last report and the US Dollar gaining strength against the Lira we’ve seen prices dip under the $1800 per ton FOB level. This fall in price has been pegged back in terms of an export price by the slight uncertainty on the interest rates the Turkish banks are using and in terms of a price to customers by the change in the GBP/USD rate over the last month (high of 1.3205 / low 1.2738).

The view of the market forward is a difficult one to make. There are always at this time of year two chains of thought:

1. Prices will remain fairly stable until we get past the frost/storm damage risk period of end March & April without major incident. Once this has passed we will see the forecast of the coming crop as being more than enough fruit to meet demand and prices for the surplus 2019 stock, for which there should be 20,000 to 30,000 tonnes, will begin to soften and this has the potential to do so dramatically.
2. Prices will remain fairly stable until we get the first major frost or storm damage. At this point we will see prices increase immediately with no limit to where they might settle.

Again the biggest advice we can give is to look at market prices currently being quoted and judge this against budgets/target levels. There truly is no right or wrong answer when deciding what to do.