Turkish Vine Fruit Update
Everything in Turkey at the moment would suggest downward pressure is going to be applied to pricing of raw material in the coming months.
- Exports are down 8% year on year for the crucial Christmas period of September to December, which is made even more astonishing when you consider almost all major European players had next to no stock at the end of August.
- Export for December alone was down 45% Y-o-Y (2018 – 20,777 tonnes & 2019 – 11,354 tonnes).
- Bourse Registrations are up 23% for September to December, which was to be expected somewhat with an increase of 17% on crop estimation Y-o-Y.
- 60% of this years crop has been registered at the bourse, whilst only 34% has been exported thus far.
|Crop Estimation 2018||1st Sept 2018 to 31st Dec 2018||Crop Estimation 2019||1st Sept 2019 to 31st Dec 2019||Differential Year on Year|
|261,000 tonnes||Export Volume 113,566 tonnes||305,000 tonnes||Export Volume 104,364 tonnes||Export Volume 9,202 tonnes down|
|Bourse Registrations 148,798 tonnes||Bourse Registrations 183,025 tonnes||Bourse Registrations 34,227 tonnes up|
- If exports carry on at roughly 18,000 tonnes per month (the average for Jan to August over the last 2 years) then exports will total somewhere around the 240,000 to 250,000 tonnes for the 2019 crop at the end of August. This is on par with 2018 crop (252,450 tonnes exported) which as we know was smaller in estimation, meaning a significant carryover of stock into the 2020 crop (circa 25,000 to 30,000 tonnes assuming domestic usage is about 30,000 tonnes per year).
- Taris and the TMO (Government body) have now stopped buying material on the Bouse at 10 TL/KG, as had been their strategy since September.
What all of this means is that with low export figures, high bourse registrations meaning plenty of stock in packers hands and a lack of buying by the TMO/Taris is that raw material prices are already beginning to show signs of weakness. Farmers are still asking for 10 TL/kg but given a lack of interest are accepting 9.5 to 9.6 TL/kg levels to move material on. The hardest thing to predict is where will this pricing level will go and then where it will settle. Traditionally we see prices fairly firm during the beginning of each year as the fear surrounding frost and storm damage during the crucial period of March & April causes caution in general.
Lira Weakness & Regional Instability
The Lira has already shown some weakness against the US Dollar in 2020 going from 5.952 to 5.977. There is a fear in Turkey that this could easily reach 6 to 6.2 early next week through fears of what the USA’s latest action against Iran means given that Turkey & Iran share a border, albeit some 1100 miles from the Vine Fruit region.
Only this morning the Turkish government voted to allow troops to be deployed in Libya to aid the government in a “training & advisory” role in their bid to end a civil war. This action has already been widely condemned by many countries and other NATO members. This increase in escalation adds another political factor to consider alongside Turkey’s issues with Kurds in Syria and any potential fallout with the international community.
Pricing coming out of China and Iran is $200 to $300 per tonne cheaper than it’s closest Turkish equivalent. Both origins have plenty of material to sell and are offering material on medium to long term contracts for sizable tonnage. Californian prices have drastically reduced over the last 3 months and instead of being $500 to $700 per tonne over Turkish are now around $150 to $200, which is a lot closer for those markets that prefer Californian material (the Japanese market being a large import market that will pay that level of premium). Harvests in Southern Hemisphere producing countries are on the horizon with reasonable crops expected by both Chile and South Africa. Worldwide supply is plentiful and on the main competitively priced.
Given all of the above the biggest factor in downward pricing for me is the fact that Turkey competes with Turkey. Slow exports/sales coupled with large stockholdings in packers hands and a weak Lira against the USD will mean that packers start to chase sales by dropping their margin. How far and how quick prices will drop is going to be the main thing to keep a very close eye on in the coming weeks, an opportunity to secure a good price before any potential frost/storm damage occurs in March & April is potentially there.