Hazelnuts: Effect of inflation on export

Date: 22nd April 2022 Category: Latest News
Hazelnuts: Effect of inflation on export

As people struggle with skyrocketing prices in Turkey, hazelnuts have turned highly political. Exporters are keen to avoid the TMO and regard the Turkish lira as a killer. Suppliers even state that the situation is so bizarre that it hardly matters what size the new crop will be as other factors will largely determine prices.


Lost in politics

After the TMO failed to attract buyers for its hazelnut supplies in Levant quality in the second round of sales, the state-run organization has now decided to sell 500 mt in Giresun quality at an inshell price of TRY 43.50/kg. The issue is that exporters sensed a trap since many incurred heavy losses after buying from the TMO at too high prices two years ago. Rumors over frost-related damages or that buyers in Europe will urgently require stocks have proved unfounded so far and were clearly designed to drive up prices. While the Exporters’ Union maintains an inshell production estimate of 790,000 mt, the Chamber of Agriculture has dismissed this claim as a means of keeping prices low and exporters happy. Suppliers reckon that official announcements are driven by political rather than fact-based motifs, which shows how political hazelnuts have become.


Although the TMO is supposed to regulate the market and make sure that prices remain sustainable for farmers, the only incentive is to keep voters happy, primarily since the next general election will be held in 2023. Current crop estimates range at 650,000-790,000 mt, and news from the orchards is highly encouraging, with the May flowering just about to begin, after which the new crop prices will largely be determined. 


Another issue to consider is that demand is deficient. The domestic market has faltered since hazelnuts have become a luxury product most people can no longer afford. Although sales would typically pick up towards the end of Ramadan, people are instead struggling with skyrocketing prices as Turkey is being hit by hyperinflation and a surge in energy and food prices due to the war in Ukraine. The independent economic research group Enag even estimates Turkey’s real inflation at 142.63%. Reports state that supplies for essential products such as sugar or oil have only been limited to two packs in most grocery stores. While manufacturers still paid to TRY 3.80/kg for sugar in April, they now need to pay TRY 16.00/kg. (mundus-agri)


Lira is a killer for exports to Europe

Export demand is also very much subdued. Recent export figures show no new contracts are being made as raw kernel exports only ranged at 4,961 mt on 10-17 April, whereas 5,948 mt were exported in the same week last year. As the lira is expected to decline, many buyers prefer to wait. Although the lira has recently remained relatively firm against the US dollar, this was done by dubious agreements that involved swapping and selling other currencies. It has now emerged that the net reserves held by Turkey’s Central Bank range at minus USD 50-60 billion. In other words, the lira is a killer of exports at present.

Nevertheless, it should be noted that total exports for the season hit 256,760 mt on 17 April, which is 28% up from the 199,671 mt exported in the same period last year. If average exports maintain around 4,000 mt per week, they may well amount to 330,000 mt by the end of the season. However, last year’s figures were still primarily impacted by the pandemic.(mundus-agri)