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Hazelnut Market Update - May 14, 2020

Open market liquidity continues to be extremely limited. After the TMO declaration of 24 TL inshells, we witnessed a couple of days when we had offers below 50 TL, but as the news of substantial over-subscription of the TMO allocation hit coupled with currency depreciation by another 2-3%, liquidity has again been constrained. We have last heard of some trades being concluded at 51 TL kernels.

For the 20K TMO offer, bids amounting in excess of 300K have been received. It is expected that only 5-7% of the bid quantities might get allocated to exporters. The TMO allocation is expected to be concluded by next Tuesday.

The overall perception of a shorter 2020-21 crop has led to hoarding from farmers and speculators. After the flower count exercise and the March/April frosts (which have not affected the crop significantly), market estimates are 600-625K inshells for the next crop. However, some experts are privately mentioning that crop size might be lower than 600K.

The market news also continues to be dominated by the COVID-19 impact on demand.

The market continues the bullish tone locally. None of the large buyers have bought at elevated levels yet, but since quite a few are uncovered for Q3-Q4, we anticipate them covering soon.

The TL continues to depreciate sharply, touching lows of 7.22 on Thursday, before gaining some ground and closing around 7.10 over the weekend.


Both bullish and bearish factors are weighing on the market. Bullish factors have been dominant for the last few weeks and prices have moved up as per our expectations. The BIG question now is, has the market already factored the fundamentals?  Or, is there room for further upward movement.

Bullish Factors

  • Shorter crop expectation for 2020-21, supply and demand points to shortage even when factoring in a 10% decrease in demand in the next season.
  • Low coverage of most large buyers for Q4 2020.
  • Local hoarders have made decent money in TL terms on hazelnut holding, on account of TL depreciation. Also, the cost of borrowing is around 10% for TL, which is much lower than the TL depreciation and the upward movement of hazelnut prices. This is creating a very bullish market sentiment locally, and we might see increased hoarding, pushing prices further up.

Bearish factors

  • Demand reduction is difficult to predict for a longer period. The impact on the economy, purchasing power of individuals and in turn its impact on chocolate / nuts consumption is tough to forecast. If global demand reduction is higher than 10%, the supply shortage will be balanced.
  • Prices are in 4th quartile of historical prices. Also, other nut prices are substantially lower than hazelnut prices. Almond base prices are in the $5.00 - $5.50/kg band and hazelnut prices have moved up from $6.50 to above $7.00/kg levels. While most hazelnut consumption is as an ingredient for the chocolate industry, we might experience some demand shift to other nuts in the snacking segment.
  • Currency appreciation due to any intervention from the authorities can suddenly soften the TL prices.

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