The collapse of the Turkish lira threatens a global hazelnut shortage

Turkey's once-thriving hazelnut business has been hit by a record slump in the lira and consequently rising costs. Farmers are forced to reduce the production of hazelnuts, a third of which is bought by the Italian food giant Ferrero, which produces Nutella chocolate spread.

“The world is facing a shortage of hazelnuts,” told Turgan Zülfikar, a New York-based consultant for Turkish companies entering the US market, the WSJ. "If you're a Nutella fan, it's best to stock up on your next grocery store visit."

Turkey provides 70% of the world marketable hazelnuts, 4 million people are employed in the industry. The seemingly inevitable decline in supplies cannot but provoke an increase in prices for consumers.

As the newspaper explains, the decline in production is due to the collapse of the national currency, which led to a rise in the price of all imported fertilizers, seeds, pesticides at a faster pace. World prices are also rising: according to the Association of Producers, the price of fertilizers has tripled this year to $650 per tonne against $215 in 2020. For the industry, this means under-application of fertilizers and, accordingly, reduced yields.

Internal factors are added to the external factors - more expensive energy and transportation. In addition, the government is preparing to raise the minimum wage in order to combat inflation (now 21%), which will also lead to higher labor costs. The exodus of farmers from the walnut farms that fed them for decades has already begun, the newspaper writes.

• The Turkish lira has lost about 50% against the dollar since the beginning of autumn due to the low interest rate policy of President Recep Tayyip Erdogan. The day before, the lira fell below 18 against the dollar, and today it rose to 12. The reason for the jump is the emergency measures announced by the head of state, which include reducing the tax on dividends, compensating for the loss of profitability of deposits in lira from the fall of the lira against major currencies, etc.
• According to Erdogan, the rate cut will stimulate the growth of the economy, exports and lending in Turkey, but businesses warn of the opposite effect. Among other things, nut producers fear that they will have to lose their market share to other players from Italy, Georgia and the United States.
• Economic models in which high rates stimulate inflation exist, but do not apply to Turkey, notes the Financial Times . According to the publication's experts, inflation above 10% in the country has systemic causes, and artificially low rates no longer save businesses with debts and costs in rapidly rising foreign currencies. “If Erdogan kept 10 lira per dollar, there would still be a chance. But with this kind of inflation, the competitive advantage will disappear and we will fall into a spiral,” Tim Ash, Senior Emerging Markets Strategist at Blue Bay Asset Management, told the publication.