The hazelnut market took an important step this week. Immediately after the holidays, the TMO published its first tender. A total of 27,000 mt of hazelnut kernels were released for sale. Of these, only 500 mt are from the 2023 harvest and the rest from the 2022 harvest. The sale was expected, but not the price level. The TMO is calling for a price of TRY 124/kg for the 2022 harvest and TRY 130/kg for the 2023 harvest. This puts the price 10 - 15 TRY/kg above what most market participants were expecting.

Reaction of the market

The announcement was received with corresponding suspicion, especially as the TMO is not allowing negotiations on the randıman this time. Immediately after this announcement, the market leader also published an adjustment of its purchase offer to TRY 130/kg for hazelnut kernels in shell. As already reported a few weeks ago, the competition authority's proceedings against the market leader have been discontinued, but with the condition that the market leader may not make any purchases below the level of the TMO. This applies to TMO's purchase and sales prices. What was initially dismissed as a "paper tiger" is, however, a powerful tool for the TMO. It can now achieve a great deal with little effort. This is because the market leader is responsible for around a third of the trading volume. The low volume of only 500 mt of the tender harvest is therefore the real lever that has now ensured that prices, especially for natural kernels, have risen significantly. Although we recorded a slight easing in the free market towards the end of the week, there was a difference of almost 5% compared to the previous week.

Expectations and reality

Many market participants had hoped that the TMO tender would bring some relief to the market. However, the opposite is the case. While prices for later dates have tended to fall in recent weeks, sellers are now almost no longer willing to speculate. According to the current level, together with the still very high inflation, some are now saying that the TMO will set a minimum price of 140 TRY/kg for the coming season. If the following harvest estimate in May is also revised downwards, there is little hope of a return to a reasonable price level. However, this mainly applies to natural kernels. It should not be underestimated that there will be many lots of inferior quality. (see TMO surplus from the 2022 harvest) It is therefore possible that the prices of certain processed products will not be affected as much. Other market forces are also having a regulating effect on the level and the exchange rate trend should not be assumed to be linear. All in all, however, we should be prepared for sellers' offers for the 2024 harvest to be less risk-averse in the coming weeks.

Another special feature of this season is that the market leader is still buying hazelnut kernels in shell at this time of year and has not yet published a price for natural kernels. It is assumed that this bid will follow in the coming days due to the continued small quantities it receives. However, many see the behavior as a harbinger for the coming season. The construction of the company's own "giant" cracking factory is more or less complete and it is assumed that the first tests regarding the factory's capacity will be carried out with the goods currently being purchased. Market participants are talking about a capacity of approx. 1,000 mt per day that the market leader could process, whereby a daily quantity of 500 - 600 mt is more realistic. However, the expansion of this capacity is likely to have a massive impact on the western growing region, which will be at the expense of existing local processors. We therefore expect high intensity at the start of the coming season in this region.

In the coming week we expect to see the results of the TMO tender and an overview of the volumes that the market leader was able to purchase. We will also see what level will remain on the free market. We also expect that buyers who have waited until now will now increasingly focus on the outstanding cover. It is possible that some will wait for the harvest estimate to be published, but many no longer see this as a reason for any significant easing.

A word on the exchange rate. The Turkish lira weakened again slightly over the course of the week, but fluctuations in this small range are not a relevant issue.

Bullet points

• TMO publishes its first tender with 500 mt of the 2023 crop at TRY 130/kg and 26,500 mt of the 2022 crop at TRY 124/kg.
• The market leader increases its purchase bid in parallel to 130 TRY/kg.
• Exporters are raising prices accordingly as a first step, but are still waiting for the market to react.
• The sellers' tendency to speculate is clearly declining.
• Prices are moving upwards again, contrary to the expectations of both buyers and sellers. Many sellers are now realizing losses (speculation, sale of goods on commission, etc.)
• The exchange rate tends to remain stable.