Turkish delight over a ‘very political’ nut

HAZELNUT prices have surged almost 10% in the past 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 late last month, a week after the country voted for a new constitution that handed President Recep Tayyip Erdogan more power.

Turkey produces 75% of the world’s hazelnuts, with the key growing regions concentrated along the Black Sea coast to the east of the country — areas that voted for Erdogan. About four million people are directly and indirectly dependent on the hazelnut sector in Turkey, with the nuts produced by small growers.

Hazelnut prices have been volatile over the past few years, largely due to the weather. The market had weakened last year, dropping 10% to a low of 21.5 Turkish lira (about R81) 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 favour of our producers.”

The commodity, which is not traded on an exchange, had last traded at about TL24 a kilo, said Adam Johnston at berries, nuts and fruit merchants Freeworld Trading in Scotland. The hazelnut had “become a very political nut”, he added.

Buying by the TMO, set at TL10-10.5 a kilo for nuts in their shells — 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 this month, buyers were looking to stock up on hazelnuts, pushing up prices, said Laurent de Ruiter, trader at Global Trader & Agency, a Dutch nut trader.

Hazelnuts are eaten with dates during the Muslim holy month.

“There are a lot of buyers in the market who are looking to take even small supplies,” De Ruiter said, adding that prices were expected to remain high for at least another three weeks.

Despite the latest rally, prices are lower than in 2014 and 2015. Turkey’s hazelnutgrowing regions were hit by bad weather in 2014, when frost devastated crops in higher altitudes.

The 2014 crop, initially forecast at 800 000 tons, was less than half that. The market soared, rising over TL40 a kilo during May and June of 2015.

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 tons meant 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.

These companies had more or less covered their needs, said traders, and 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 board also sold chopped kernels and oil. — © The Financial Times