Last weeks Turkish Hazelnut Market was characterized by negative impressions of quality deficiencies in the first deliveries. However, this week there is more optimism as the quality of the newly delivered batches is back to normal. Nevertheless, critical voices are increasing, advising caution.

Significantly smaller kernels

• Since this week, the influx of raw materials into the market has increased significantly, and prices have steadily fallen until mid-week. However, since mid-week, there has been a slight upward trend, although not for all calibers and not reflected in export price lists due to exchange rate dynamics.
• The current harvest shows that the kernels are significantly smaller than in normal years, especially in the western growing regions. There is an above-average number of kernels in the 9-11 mm calibration and fewer large kernels in the 13-15 mm calibration.
• In eastern growing regions, there seem to be mainly kernels of the 11-13 mm calibration.
• Many batches have a high percentage of defective kernels. Another characteristic of this season seems to be the poor peelability of the kernels, even for the Giresun variety, which suggests that the price for "fully blanched" kernels will likely remain high.

Market leaders' offer expected this week

The market leader is expected to present its purchase offer starting next week. Even though we expect an increased influx of raw materials into the market next week, we believe that the lowest price in the free market for 11-13 mm kernels has likely been reached.

• The price of Levantine quality raw materials in the shell fluctuated between 115 and 117 TRY/kg this week. The TMO's offer is 130 TRY/kg, and the market leader's price will also be at least 130 TRY/kg.
• Due to the many small kernels in the western growing region, the market leader may need to purchase larger quantities than usual to sort out the desired quality. It is questionable what the market leader will do with the large quantity of rejects. They could process and market it themselves or return it to the market as natural produce. This behavior will have an impact on the price of processed goods over the course of the season.
• While prices for normal and large kernels of good quality are likely to remain stable or even firm, it is possible that the price of small kernels will continue to fall. Roasted broken kernels are also likely to increase in price due to their poor peelability. It is therefore unlikely to be affected by an increase in price. Small preparations (e.g. 0-2 mm and 2-4 mm) as well as paste should therefore currently be stable or even on a downward trend. The lower quality lots are now also finding buyers, albeit at a significant discount (approx. 75 TRY/kg).

Risk for traders and exporters?

Although we currently have a very good influx of raw goods into the market, the dates for delivery to the TMO are also in high demand. There are no official figures yet, but the dates are already well booked. However, there are also changes in the free market.

• In certain regions, for example, more than half of the farmers are selling the kernels on a commission basis. This means that although the kernels are available on the market, the price has not yet been determined. This entails a certain risk for traders, but also for exporters.
• For some time, this option was not popular, but this year it is celebrating a rebirth, as it is a favorable alternative to financing for dealers. However, it has great potential for dissatisfaction.
• In the past, farmers/traders benefited from the steady rise in prices due to inflation and, for buyers, compensated by the depreciation of the Turkish lira against major currencies such as the euro or US dollar. The recent devaluation of the Turkish lira of around 6% in the last month therefore raises hopes that this game could work again.
• While there have been massive slumps in the exchange rate in recent years, the Turkish lira has been falling quietly but steadily in recent weeks. The price reduction we have seen in recent weeks is once again largely due to the exchange rate, which, as in the past, is probably the biggest lever of price development.

Weakening Turkish Lira

We continue to hear about options from Turkish banks that are betting on a further fall in the exchange rate. Rumors about the person of the finance minister (Mehmet Şimşek), as well as changing interest rate policies, are now causing the assumption of stability to be questioned again. In the last week alone, the Turkish lira lost more than 2% against the euro, although this has more to do with the appreciation of the euro than with any weakness in the Turkish lira.

We expect activity in the market to pick up again next week. Most factories are now starting to work again and the alternative origins are now also very active as sellers and are trying to realize deals. However, there is also some buying interest from buyers, although overall we continue to see that customers are only covering their short-term needs and avoiding long-term contracts.

Key Points:

• Raw material prices in the free market seem to have reached a lower limit, as the market leader's purchasing activity is expected from next week.
• There are many small kernels that could become even cheaper. However, large kernels of good quality are in demand and tend to be stable or on the rise.
• The quality of kernels from the middle regions (> 300 m above sea level) is back to normal.
• Exporters' price lists are still very heterogeneous, although there is some alignment in the prices for natural kernels.
• Sellers from all origins are currently very active. Buyers are interested but still focused on short-term purchasing.
• The Turkish Lira is weakening again, and the effects are now noticeable in the price lists, leading to discussions of a possible trend reversal.