HomeNewsTurkish president announced purchase prices for hazelnuts – how this will affect the situation in Georgia

Turkish president announced purchase prices for hazelnuts – how this will affect the situation in Georgia

Prices may not be as high as expected earlier, while the importance of Georgian hazelnut quality will increase

Turkish President Recep Tayyip Erdoğan just announced the price for Turkish hazelnuts, crop 2021. Turkish Grain Board (TMO) will buy Giresun quality hazelnuts at 27 TRY/KG and Levant quality at 26.5 TRY/KG (in shell basis). These are lower prices than some Turkish growers expected. Buying criteria and start date is yet to be announced.

About two weeks ago we discussed what Georgian hazelnut export prices would look like based on expectations on Turkish market, specifically the price floor set by TMO. There were some expectations that it would be 30 TRY/KG, but as we now see, the floor is much lower. Thus, the export prices will not be as high as previously forecasted.

TMO price has a very strong connection and almost one-to-one correlation to Turkish export prices. Generally, Georgia exports hazelnuts at lower prices than Turkey, which is mostly attributed to the differences in quality. For the past four years, the export prices in Q4, which is a major exporting period, have been 6 to 13% lower than Turkish export prices. Coming from these dynamics, majority of Georgian hazelnut kernels are likely to be exported at 5.80-5.90 USD/KG (FOB), about 5-7% lower than earlier forecast which was based on TMO price floor of 30 TRY/KG.

Exporters will find these prices slightly worse than a year earlier, but about 4% better than the average of past four years. The latter is in line with Georgian hazelnut recovering from brown bug invasion.

Ongoing high inflation in Georgia, will be more damaging than Georgian hazelnut export prices not rising in year-on-year terms. According to the national statistics office of Georgia, prices for consumer goods rose by 11.9% in July 2021 compared to July 2020. Meanwhile, Georgian Lari exchange rate has worsened only by 2%. High inflation is very likely to remain at least by the end of the year.

Such movements in hazelnut export prices, inflation rate and currency exchange rate, mean that a kilogram of exported hazelnut gives Georgian exporter about the same income in Lari as a year before, but now inputs and other goods and services cost much more.

Good news can be that high inflation is linked to one-time factors. National Bank of Georgia attributes surge in local prices to higher global food and oil prices, and increased demand on local market, which partly results from a weak base period when pandemic-related lockdowns reduced the demand.

Overall, current hazelnut season will be challenging for Georgia. Now it looks like the average export price will remain close to the previous season’s price, lower than forecasted earlier. The revenue per kilogram will have lower purchasing power, so having good harvest will be crucial. Growers who focused on quality will have much easier time as their prices will be better, possibly high enough to make these growers not feel ongoing high inflation rate in Georgia.


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