After a fairly long period, we witnessed sizeable trades in local Turkish and European markets. Hazelnut prices have corrected from the highs in May, which has prompted some European buyers to cover at these levels.
Offers have declined from the high levels of 48-50 TL now to 42-43 TL. No large stocks are available at these levels, but we have seen some speculators now keen to offload their position. With a stable TL, equivalent USD prices have fallen from above $7/kg now to $6.40/kg in the span of 2 weeks.
Out of the overall crop of +800K MT inshell, we expect a carry over of around 70-80K MT into next season. On a backdrop of a massive hazelnut crop, this carry over is lower than expected.
The INC declared an estimate of 620K MT inshells for the next season for Turkey, in line with market expectation. However, the market believed the Italian crop to be around 100K MT, while INC has estimated it to be around 130K MT.
The COVID-19 impact on demand seems to be higher than initially projected – food service, HoReCa, premium chocolates and travel/tourism related chocolates have been getting hit. However, the mass chocolate consumption seems unaffected, and we have some feedback that the bread spread consumption might even slightly increase. Overall we should expect a reduction in demand to an extent of a higher single digit percentage.
The TL has been stable around 6.80.
We believe both bullish and bearish factors are weighing on the market, and market will move rangebound. The prices have corrected more than expected, and we are witnessing support below the $6.50/kg level.
Shorter crop expectation for 2020-21, supply and demand points to a shortage even when factoring in a 10% decrease in demand due to COVID. We await the fruit count exercise to be concluded around early July for further guidance on crop size. Any reduction in Turkish or Italian crop estimates can trigger price increases.
Low coverage of most large buyers for Q4 2020.
Demand reduction is difficult to predict over a longer period. Currently global demand points to a single digit percentage reduction in chocolate consumption, and a larger reduction in the HoReCa / food service segment.
Hazelnut prices are substantially higher in comparison to other nut prices. Almond base prices are below $4.00/kg and hazelnut prices have still been above $6.50/kg. While most hazelnut consumption is as an ingredient for the chocolate industry, we may have some demand shift to other nuts in the snacking segment.
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