Hazelnuts Growers have a good future in South America

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Why ?  Government intervention in Turkey has sent Hazelnut Internaational prices soaring.

Turkey produces 75 percent of the world’s Hazelnuts, with the key growing regions concentrated along the Black Sea coast to the east of the country, all areas that voted for Mr Erdogan. There are about 4,000,000 people, directly and indirectly, dependent on the hazelnut sector in Turkey, with the nuts produced by mostly small growers.

Hazelnut prices have surged almost 10 percent in the last two weeks after the Turkish government intervened to support the market for the first time in eight years. Buying by the state-run Turkish Grain Board (TMO) began in late April, a week after the country voted for a new constitution in a historic referendum that handed President Erdogan more power.

Hazelnut prices have been volatile over the past few years largely due to the weather. The market had weakened for much of 2017, dropping 10 percent to a low of TL21.5 a kilogram just before last month’s referendum.

Announcing the government’s intervention, Faruk Çelik, Turkey’s minister of food, agriculture, and livestock, said the price fluctuations were “upsetting producers”. “We will purchase Hazelnuts in favor of our producers,” he added. The commodity, which is not traded on any exchange, had last traded at about TL24 a kg, according to Adam Johnston at Freeworld Trading in Scotland.

The Hazelnut had “become a very political nut”, he added. Buying by the TMO, set at TL10-10.5 per kg for nuts in their shells which is equivalent to TL20-21 for shelled hazelnut kernels had provided a floor for the farmers, who were now selling to the government, or hanging on to their crops in hope of higher prices, said traders.

With Ramadan beginning at the end of May with buyers looking to stock up on hazelnuts, pushing up prices, said Laurent de Ruiter, a trader at Global Trader & Agency, a Dutch nut trader.

Hazelnuts, known for their crunchiness and flavor, are used in desserts and served inside dates, eaten during the Muslim holy month. “There are a lot of buyers in the market who are looking to take even small supplies,” he said, adding that prices were expected to remain high for at least another three weeks.

Despite the latest rally, prices are lower than the levels seen in 2014 and 2015, when Turkey’s key Hazelnut growing regions were hit by bad weather. In 2014, severe frosts devastated the crops in higher altitudes. The 2014 crop, initially forecast at 800,000 tonnes, ended up being less than half that number. The market soared, rising over TL40 a kg during May and June of 2015 as the shortage took its toll ahead of the start of the year’s harvest in August.

Hazelnuts tend to alternate between “on” years, producing a bumper crop, and “off” years, when the tree recovers from the previous year’s production. While the 2016 crop was smaller than the normal “off” year, 2015’s bumper harvest of 680,000 tonnes meant that there was plenty of inventory available.

The main buyers of Hazelnuts are confectionery makers, who use the nut in chocolate bars and spreads, such as Cadbury’s Whole Nut bar and Nutella, made by Ferrero, the Italian chocolate maker. These companies had more or less covered their needs, so the stock had weighed on the market before Ankara intervened.

The TMO was a regular buyer of hazelnuts between 2006 and 2009. In an effort to stabilise the market, it bought up excess supplies, while the state-backed marketing board released the stocks when the market was tighter.  The marketing board also produced and sold chopped kernels and oil.

Turkey is now seen as a problematic supplier for Europe and which is the main buyer for the nuts driving the interest for investors in Chile and other more politically stable countries to grow the crop.

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Post available in: English