After the Feast of Sacrifice celebrations, there was a certain amount of movement in the Turkish Hazelnut Market, albeit not in the form of an active mood of optimism, but rather a negative balance. There are several reasons for this.

Farmers' Situation

Let's start with the farmers. Although they have received the highest prices so far this season in Turkish lira terms, this is little consolation given the current inflation rate of 71.6 % compared to the previous year. Those who still sold goods on commission had to settle these with the collectors at the end of May. As the quarterly loan interest payments were due at the end of June, many small traders only now realised the severity of the interest burden, which is why we saw many traders sell off their raw goods at the end of June.

For the next 2-4 weeks, the general expectation is that the market will be stable to slightly falling and then the new harvest is due, which is why traders and crackers currently have little interest in holding the raw material. We therefore have a similar situation to last year, although the harvest forecasts were much more positive back then, although the interest rate level was also more moderate at the time.

Prices at the Bottom?

We are hearing from some crackers that they are already starting to wind up the season and are beginning to sell off the remaining stocks of raw goods. As there is currently little export and domestic demand, prices have been under pressure for a few weeks now. The question will be when the bottom will be reached. Exporters have different views on this. Some say that we are at the bottom of the cycle, while others still see room for improvement, although a differentiated view is required. Above all, it is important to consider whether the statements refer to the 2023 or 2024 harvest.

One reason why prices are falling at all is that the market leader now appears to have actually finished the season. The market assumed that there would be another surge in demand from this side. However, the market leader has covered its demand via other exporters, so the market will enter the new season without TMO stocks, which was not originally expected. However, we also see that exporters will start the new season with a very low carry-over, which is also a certain risk.

TMO's Economic Outlook and Pricing Strategy

For the TMO, the season did not go as well as hoped for the first time in a long time, although it must be said that the TMO should not / does not have to act economically, but has (presumably) always been economically successful in recent years. The TMO will therefore start the new season with a stock of approx. 80,000 - 100,000 mt of the 2022 harvest. It is currently asking TRY 127/kg for this product. On the free market, the product is currently trading at approx. 112 TRY/kg. It is therefore very unlikely that any further quantities will reach the market this season. The TMO will also be active again next season.

The question is what will the price be?

In recent years, the price has been published between 26 July and 11 August. Compared to the previous year, we have an average inflation rate of just over 60%. The Turkish lira has depreciated by around 25% against the USD in the last 12 months. This means that a delta of at least 35% has to be balanced out. Taking last year's starting price of 82.5% as a basis, the minimum price would be around TRY 111/kg, which would roughly correspond to the current market level, but would also mean that the free market would stabilise slightly below this.

A price around USD 3/kg?

Others say that the TMO will stick to the trend of price stability and offer an equivalent of around USD 3/kg. Converted, this would be approx. 100 TRY/kg. However, this is so far below the selling price of the 2022 harvest (at TRY 127/kg, see above) that this approach is considered unlikely, despite very good harvests worldwide. Most market participants fear a price of around TRY 130/kg from the TMO, which will then also correspond to the market leader's purchase bid. However, this is also likely to mean that the TMO will no longer be able to sell its old stocks. As the ministries are under pressure to economise, this scenario could perhaps lead to a change in strategy and anger the farmers. Bear in mind that there are currently no elections.

Exporters are monitoring the situation very closely at the moment; a few of them still have good stocks, but the majority are probably only covered for the short term. As in the previous year, the market is currently being monitored very closely.

2024 Harvest

With regard to the 2024 harvest, the final counts have now begun. Some are reporting a much more positive estimate than in May and the infestation with the marmorated stink bug is not as bad as originally assumed, although the actual effects will only become apparent at harvest. There are also the first reports of a large number of empty kernels (similar to last year), so the overall mood remains cautious and the positioning of market participants varies.

With regard to events on the foreign exchange market, we noted a slight recovery of the euro against the US dollar and the Turkish lira last week, which also had a positive impact on prices for buyers. The Turkish central bank has left the key interest rate unchanged at 50% and inflation has fallen slightly. However, there are increasing signs of greater stability and economic recovery.

Bullet points

• Commodity prices are falling as many participants are disposing of their stocks.
• Export and domestic demand is currently low. The market is living from hand to mouth.
• Exports for this season will reach around 290,000 mt, which is above original expectations.
• There are still differing opinions regarding the 2024 harvest in terms of quality and quantity, but a more positive result is emerging than originally expected.
• There was a slight downward movement in the exchange rate. However, the impact on the price lists remains relatively low at around 1%.