There was hardly any activity on the hazelnut market this week. Many exporters traveled to the INC in Vancouver at the beginning of the week, so there was an interruption in activity due to the trip alone. But buyers also adopted a wait-and-see attitude, as they wanted to wait for the INC forecast.

What was already known in advance, at least for the origin Türkiye, was the downward revision of the harvest estimate. However, the forecast was also adjusted to the (provisional) actual figures for the other origins and, although only backward-looking, is no less interesting for the future trend than the forecast for the coming harvest.

 

The following changes are noticeable in the comparison

• Correction of the harvest volume in Türkiye (sufficiently addressed in the previous year).
• Correction of the harvest volume in Italy (drought, poor quality due to insect bites).
• Yield increase in the USA with increasing export activity to Europe.
• Georgia and Azerbaijan are producing in line with expectations, but with increased quality problems this year.
• Spain recorded a significant volume correction compared to the original expectation, but in the end it is a normal harvest.
• France has been producing a more or less constant volume for years.
• China is increasing its volumes significantly, which is due to the fact that many plantations are now producing high yields for the first time.
• Iran has been producing a more or less constant quantity for years.
• Chile is falling short of expectations due to various problems.

Overall, the following statements are important for us

• Contrary to expectations, the surpluses were reduced this season. This is due to the harvests in Türkiye and Italy, which were significantly lower than expected. In addition to these corrections, global consumption has also increased significantly more than originally expected, by around 6.5% compared to the previous year, despite the current high prices, which is surprising.
• Turkish exports benefited on the one hand from the favorable contracts in the run-up to the harvest, which was still closed at a low level, but also from the below-average harvest in Italy, which ensured good exports to the second most important producing country.
• Türkiye's forecast ending stock of 135,000 mt is roughly in line with the TMO. However, it can be assumed that exporters will maintain a total permanent stock of 50,000 - 60,000 mt to meet their immediate obligations. This also shows that purchases from the TMO are expected in the coming weeks and the current price level is therefore likely to continue for some time.
• With the exception of Türkiye, hardly any country has significant surpluses. Türkiye is still the only country that can supply the entire season every year. However, its share of the overall market is decreasing. This season, the market share was only 58%. In the short and medium term, Türkiye will remain the most important producer country. In the long term, however, its importance will diminish unless producers, the industry and the state develop a strategy in this regard soon.

But now let's look ahead. Let's take a look at the published forecast

At first glance, it appears that we can expect a significantly expanded supply in the coming season. Almost all origins are forecasting an increase in yields. However, there are also voices of caution. The Türkiye origin in particular has already indicated that the presence of the marmorated stink bug could lead to a certain volume correction. The events (volume correction) of the current season also call for a certain degree of caution. However, a certain correction could also occur in Italy, depending on the heat in summer. We consider the increase in the USA to be realistic. The slight increase in the origins of Georgia and Azerbaijan is also realistic. We currently have no data on the origins of China and Chile to evaluate the estimate.

High increase in consumption and cocoa prices

After the surprisingly high increase in global consumption this season, the forecast once again sets a very optimistic target for the coming season. It is doubtful whether a renewed increase of more than 10% compared to the previous year is realistic. Although there are signs of economic stabilization/recovery in many countries around the world, it is questionable whether the increase in sales is feasible at the current price level, especially as the price of alternative nuts (especially almonds) is significantly lower. It should also be borne in mind that many hazelnut kernels are used in the chocolate industry. Due to the high price of cocoa, this industry has an uncertain future in terms of sales figures for the coming year. Nobody yet knows how the high prices for chocolate will affect consumption. However, this could be countered by the trend to reduce the proportion of chocolate in the product and increase the proportion of other ingredients such as nuts or other fillings. Overall, however, we consider the forecast to be very optimistic.

A difficult season for Türkiye

We also consider the sales forecast for Türkiye to be very optimistic. If the other origins, especially Italy, have a correspondingly good harvest, it will probably be difficult to achieve sales at the current high level. In our view, this can only be achieved if prices fall significantly. Türkiye is therefore heading for a difficult season. On the one hand, we still have inflation of well over 50% in the country, which is encouraging a rise in domestic prices. While export prices remained affordable in previous years due to the steady depreciation of the Turkish lira, we have now seen continuously rising prices due to the stability of the Turkish national currency. Much will depend on which path the TMO will take in the coming weeks and what minimum price it will announce in July.

TMO's decision

One scenario to avoid is a significant increase in the surplus. The TMO could therefore be faced with an unpopular decision. However, it is (unfortunately) more likely that it will maintain a pro-producer strategy in order to avoid inflaming the political mood. As the market leader in Türkiye has also guaranteed a link to the TMO price, this decision will have a major impact on the market. It will therefore be exciting once again, with most voices in Türkiye expecting a decision with a short-term mindset.

All in all, price negotiations are likely to be interesting in the coming weeks. Most buyers see the big harvest and therefore expect significant discounts on prices. Normally, there should be no shortage of suppliers willing to speculate. However, most Turkish exporters have great respect for the uncertainty of the minimum price set by the TMO. Speculation on the exchange rate is also no longer as promising as in previous years due to the stable trend.

Pest problem continues

In addition, most people still see the unresolved pest problem and the correction from the previous year ahead of them. Most sellers have lost a lot of money this season with the previous contracts and are therefore even more cautious. Finally, we don't know how the farmers will react if the TMO sets the price “too low”. Producers now know how to influence the market with restraint and a strategic understanding of the overall market is not to be expected from this group. Therefore, despite all the optimism, there is still a great deal of uncertainty in the market on both sides.

Finally, a brief look at the week's events. In principle, there is no change in the situation here. Commodity prices have fallen slightly due to low demand (except for Giresun qualities). The exchange rate is stable. It remains to be seen whether some players will give up their long positions after the publication of the harvest forecast. However, as we still have around three months until the new harvest, we do not expect this to happen. Most want to decide at the end of May, when the forecast is even more accurate.

Bullet points

• The harvest estimate for the 2024/2025 season was published on the current INC. Overall, almost all origins are expecting very positive harvests and an oversupply is to be expected if the forecasts come true, although this should be viewed with caution.
• Turkish exporters are plagued by uncertainty about which decision the TMO will make. The coming weeks are likely to bring different market assessments and thus price lists for the coming harvest.
• Commodity prices fell slightly this week as there were hardly any inquiries.
• There was no new information this week regarding the TMO tender (second round of sampling). There was also no news from the market leader.
• There were also hardly any changes in the exchange rate.