As Turkish grains and pulses output declined sharply in 2018 harvest, Turkey, the world’s leading flour exporter, has been affected by rising trade tensions and a stronger U.S. dollar. Due to weakness of the Turkish lira, the cost of imported Russian wheat, used in the production of export flour, exceeded Turkey’s domestic wheat price in August. To regulate the price spike, the Turkish Grain Board (TMO) opened its wheat stocks at a subsidized cost in August and also received authorization to import 2.25 million tonnes of wheat, barley, corn and rice at zero customs duty, reports World-Grain.com.
A miserable crop in a bad year for the farmer
In a year which witnessed 30-45% price increases in main inputs to farming, such a fertilizers, fuel and insecticides, farmers have also been put in a squeeze by the government’s futile efforts to slow down food inflation by cracking down across the supply chain on purported “profiteers”. We receive several reports of farmers failing to plant for the new season, or saving on fertilizer, which could further depress output in 2019 harvest.
On top of these difficulties, it has been a very poor harvest, according to Turkstat data:
Cereals production decreased in 2018 with a rate of 4.8% when compared with the previous year and approximately became 34.4 million tonnes.
Wheat production decreased by 7% to become 20 million tonnes, barley production decreased by 1.4% and became 7 million tonnes, rye production not changed and remained as 320 thousand tonnes, oats production increased by 4% and became 260 thousand tonnes, when compared with the previous year.
In the pulses group, a decrease occurred in broad beans to consume by 13.8% and production approximately became 5.9 thousand tonnes, red lentil decreased by 22.5% and became 310 thousand tonnes and potatoes, one of tuber crops, decreased by 5.2% and approximately became 4.6 million tonnes.
Vegetables production in 2018 became 30 million tonnes with decreasing rate of 2.6% when compared with the previous year.
When examining production of subgroups of vegetables, root and tuberous vegetables production decreased by 2.5%, production of vegetables cultivated for their fruits decreased by 2.9% and other vegetables not elsewhere classified increased with the rate of 1.4%.
Flour exporters suffering under burden of weak TL
According to sector sources, flour millers who target export markets had to slow or stop their activities due to lack of imported wheat in their stocks during September, according to the USDA-FAS Turkey — Grain and Feed Update report published Oct. 15.
“Wheat product exporters are reportedly concerned about decreasing profits due to the economic environment as well as high competition in the sector, and there are concerns that the situation may lead to consolidations and acquisitions,” the report said.
Wheat production negatively affected
Ali Ekber Yildirim, agricultural journalist for the Dunya World newspaper published in Turkey, said the value of Turkish lira plummeting is negatively impacting the country’s wheat production.
“On average annually, Turkey imports 4.5 million tonnes of wheat and after processing, it’s exported as flour and pasta,” he said. “Turkish wheat has become below-average in cost compared to the rest of the market. Because of this, the Turkish government has stopped any exporting of Turkish wheat and flour made from local wheat. Flour exports dependent on imported wheat will most likely result in the loss of Turkey’s global flour export leadership and the markets lost by Turkey will be shared by Iran and Ukraine. The increase in price of agricultural inputs like fertilizer, fuel, seeds, pesticides is reaching 100% due to the economic crisis. This will result in reduction of the 2019 wheat crop sowings, which in turn will result in wheat imports at a higher cost and consequently less flour will be exported.”
Feed industry impacted
In Turkey, most wheat is utilized for human consumption as flour and pasta while the rest of it is used as feed. Consequently, high wheat prices also have affected the Turkish feed industry.
“Turkey’s compound feed industry has been growing by 8% to 10% every year,” said M. Ulku Karakus, president of the Turkish Feed Manufacturers Association. “As of 2018, Turkish compound feed production reached 22.4 million tonnes. This quantity is calculated as 25 million tonnes by including home mixers’ production. Turkey recently rose to ninth in the world and second in Europe in terms of compound feed production.
“The fast growth of Turkish feed production, despite limited growth in Turkish crop production, brings many difficulties on the feed materials supply. Insufficient production of feed materials such as corn, soybeans, oilseeds and bran, which are currently required by the Turkish compound feed sector, increases the dependence of the Turkish feed sector on imported products.”
He said the effect of rising exchange rates has been reflected in the feed material prices, particularly in imported products. As a result of these adverse events, the prices have increased by 35% for barley and corn, 23% for soybeans and 20% for wheat bran in the last two months, making it difficult to purchase these products from the domestic market. “In addition, raw material prices are expected to increase because of high demand from the feed industry and rising costs of other production inputs such as fuel oil, fertilizers, etc.,” Karakus said. “It is highly expected that this rapid raw material price increase will be reflected in feed prices.”