Turkish Vine Fruit Update
Last week our procurement and technical team spent a number of days visiting our suppliers of Raisins & Sultanas in Turkey to discuss and view the very beginning of 2019 harvest.
Having visited some of the same vineyards as last year it’s clear that the quality of this crop will be better than last year as long as we don't experience any rain in the next 5 weeks. The damages on the vines were nowhere near as extensive or wide spread as last year. Damages last year meant it took between 5 to 6 kg of fresh to equate to 1kg of dried, this year it should be back to the 4kg fresh to 1kg dried levels of previous years.
The number of bunches per vine and the subsequent berry count per bunch are also looking good in comparison to last year. The physical size of the berries do look smaller when comparing but this doesn't always equate to a smaller dried berry. The expectation is that the official Turkish Standards berry counts will remain as the same but the reality of what is packed will be counts hitting the middle to higher end of those levels.
So given that it looks like we’re in for a better quality crop what does that mean we should expect for new crop tonnage and pricing?
Well on Thursday last week the Ministry of Agriculture announced the official crop estimation at 300,000 tonnes against 261,000 tonnes in 2018, an increase of around 14%. You might think that's good news but when expectation has been for a crop to be hitting 320 to 330,000 tonnes it does mean even though there's a sizable increase it has tempered expectations of immediate price decreases. This announcement has understandably put the brakes on new sales as packers want to see how the market reacts and how quickly farmers will deliver their material. Whilst also announcing the estimate the ministry also declared that they will support the market/farmer by buying raw material at 10 Turkish Lira per kg for STD 9 sultanas. They will only enter the market if prices start to be traded lower than that, a number of growers were expecting 9 to 9.5 TL/kg prior to the announcement. As we’ve had two and a bit days of trading locally in Turkey since the announcement of the estimation we have seen prices open at 10 TL/Kg for STD 9 sultanas as expected, the TMO (government) remain inactive at present.
Farmers will be happy at this level if it continues in the longer term but that’s a big if. Something that’s not necessarily easy to predict if it will be the case.
Over the last 12 months we’ve had to closely monitor the economical situation in Turkey regarding the huge devaluation of the Lira against the USD and monitor any potential political powder kegs that might have an impact. We’ve gone through potential fallout with President Trump regarding Russian weapon systems, fallout with Trump over the detention of a US Pastor based in Turkey, internal uproar at the challenge of the Istanbul Mayoral election result and the huge increases in interest rates paid domestically (USD from 4% to 14% & Lira from 18% to 40%). The outlook for Turkey at the moment is positive in the fact that the rhetoric around Turkey coming out of the US is now of a fairly conciliatory tone, the political situation in Turkey is fairly stable after the result of the re-run Istanbul election was immediately accepted by President Erdogan and the interest rates have fallen back close to previous levels (USD 6% & Lira 20%).
We’re hopeful that after a number of turbulent years the number of influencing factors on pricing is going to be much more predictable and in line with previous years. Huge variances on raw material prices, interest rates and exchange rates do the stability of pricing no favour. This stability is something the farmers, processors, importers and customers crave but it’s difficult to keep everyone happy.
One variance we know we’re going to face is less of a carryover of old crop into new, which will counteract any increase in new crop size. The carryover of 2017 into 2018 was circa 30,000 tonnes whereas 2018 into 2019 is expected to be less than 10,000 tonnes, thus making 2018 available material 291,000 tonnes against 310,000 tonnes this year. Exported material from Sept 2018 to end August 2019 is due to hit 265-270,000 tonnes alongside a domestic market usage of 30,000 tonnes. In theory the expected carryover and new crop estimate should just be enough to meet supply for the coming season, if the new crop estimate figure can be believed.
The demand for new crop shipments is going to be particularly huge over the coming 8 weeks as shippers/importers look to restock an empty market due to the expected price easing. We have seen enquiries from a number of importers in France, Germany & Holland for material on the spot as they are waiting for new crop to arrive and have to keep their customers going. Prices are certainly not going to decrease in the short term.