Wheat Production:

The drought that hit Turkey in marketing year (MY) 2014 reduced yields throughout the primary wheat producing regions in Anatolia. Lower production also translated into higher protein levels, except in the Thrace region where higher levels of precipitation allowed for higher yields. On the other hand, access to irrigation in southeastern Anatolia led to higher than anticipated yields in durum wheat. As a result, Post is revising wheat production up 250,000 metric tons (MT) to 15,250 MMT, maintaining the estimate of 13.5 MMT of milling wheat and increasing total durum wheat to 1.75 MMT (up from 1.5 MMT).

2015 Production

After wheat planting finished, excellent climate conditions have been in most wheat-producing regions of Turkey at the end of 2014. The moisture is a welcome respite after the drought of 2013/2014. Most regions have enjoyed a layer of snow during a cold spell of sub-freezing temperatures.

Production area increased slightly from 2013/2014. Durum wheat area is increased approximately 25,000 hectares in southeastern Anatolia. Wheat area increased because some farmers who suffered from low cotton prices last year preferred wheat and corn. Farmers are attracted to last year's durum wheat prices.

Trade

Post maintains Turkey's estimated exports due to ongoing unrest in leading markets in Syria and Iraq. Post reduces wheat imports 800,000 MT to 5 MMT. The reduction is due to market hesitance to import wheat while Turkish currency and exchange rates with leading suppliers are volatile. Also, importers are expecting higher production in 2015. Post estimates that 5 MMT will be sufficient to fill market requirements until the 2015 harvest supplies immediate future demand.

Russia is the leading supplier to the Turkish wheat market, which is almost entirely utilized for inward processing and export of wheat products such as flour, pasta, semolina and bulgur. The Russian Ruble has continued to lose value on international currency markets since summer 2014. The market has been uneasy about the Ruble devaluation against the dollar and Russia's announcement that it will impose an export tariff of at least 35 Euros/ton on wheat in February 2015. However, recent contracts for early to late February show less impact than expected as export prices are sufficiently low for imports from Russia to remain attractive. Recent quotes from Russia and Romania demonstrate that the Russian prices are consistent with alternative suppliers at similar qualities.

Due to Turkey's inward processing regime (IPR), imports are closely linked with the level of exports. The conflicts on Turkey's southern border are hindering, but only slowing exports modestly. Although local millers feel confident that exports will not decrease in 2015, available export figures confirm Post's view that Turkish wheat product exports will be 15-20 percent lower than in 2013/2014.

Turkish flour millers export to more than 130 countries and are very competitive in world markets. However, flour millers began to have trouble exporting to key markets in Syria and Iraq in August 2014 due to conflict near the border. Nearly 60 percent of Turkey's exports are to Iraq and Syria. Conflict in the region has increased transportation costs sharply, either through fees for transportation across the border and through the conflict zone, or through vessel fees to ship product around to ports south of the conflict. Traders indicate that political and security problems have reduced exports to the region in 2014, but expect to find sufficient transportation options to maintain export levels in 2015. Turkey is looking to increase its market share in Africa and South America. The current market rate for inward processing regime certificates for milling wheat is about $100/MT, which indicates a sustained interest in their use.

Turkey's challenge to export to Syria and Iraq will likely be offset by efforts to diversify exports to alternative markets, such as in Africa and South America.

Turkey: Wheat Flour Export, MY2013

Countries

Quantity (MT)

% Share

Iraq

1,046,963

43.87

Syria

297,023

12.44

Philippines

167,091

7.00

Angola

108,824

4.56

Indonesia

97,510

4.09

Guinea

64,722

2.71

Israel

61,032

2.56

Others

543,546

22.77

Total

2,386,711

100

Turkey Export Statistics

Turkey Export Statistics

Wheat Flour

Wheat Flour

Monthly Series: 06/13 - 11/13

Monthly Series: 06/14 - 11/14

Partner Country

Quantity (tons)

Partner Country

Quantity (tons)

06/13

07/13

08/13

09/13

10/13

11/13

06/14

07/14

08/14

09/14

10/14

11/14

Total

125,196

188,694

163,863

234,976

226,624

245,486

World

153,575

158,564

208,085

194,157

189,812

200,264

Iraq

64,322

74,214

71,640

110,349

87,293

115,247

Iraq

71,998

73,786

88,864

93,720

90,819

103,447

Syria

3,785

18,450

5,928

9,204

25,094

23,575

Syria

25,580

18,873

26,644

17,399

19,654

25,800

Indonesia

0

6,244

7,680

19,013

16,019

13,502

Sudan

220

60

32

23

9,789

16,615

Angola

4,308

2,879

8,945

11,918

10,687

12,734

Angola

8,407

10,948

13,521

15,688

12,355

12,098

Philippines

13,446

19,434

9,843

16,286

19,926

11,957

Philippines

11,465

9,527

14,574

12,346

8,692

7,376

Palestine

1,599

1,257

2,291

1,215

5,061

11,781

Palestine

785

4,225

2,581

5,206

4,150

5,369

United Arab Emirates

599

1,528

1,629

11,861

11,570

11,438

Benin

2,412

3,693

4,270

4,811

6,879

3,882

US Wheat Imports

The Turkish wheat market is still closed (in practice) to U.S. wheat due to genetically engineered (GE) testing requirements that are applied only to U.S. wheat. Although there is no GE wheat commercialized in the United States, Turkey's testing methodology would detect low levels of corn or soybean in any wheat shipments. Although approved for feed use, Turkey has yet to approve any GE traits for food use. Detections of any GE in a wheat shipment would, therefore, violate the Biosafety Law. The Law specifies severe prison terms and fines for the detection of any unapproved trait.

PSDWheat

2012/2013

2013/2014

2014/2015

Market Begin Year

Jun 2012

Jun 2013

Jun 2014

Turkey

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

7,800

7,800

7,700

7,700

7,710

7,710

Beginning Stocks

3,062

3,062

1,245

1,595

1,189

2,189

Production

15,500

16,000

18,000

18,750

15,000

15,250

MY Imports

3,622

3,622

4,035

4,035

5,800

5,000

TY Imports

3,312

3,622

4,154

4,154

5,500

5,000

TY Imp. from U.S.

347

347

15

15

0

0

Total Supply

22,184

22,684

23,280

24,380

21,989

22,439

MY Exports

3,439

3,439

4,441

4,441

3,800

3,800

TY Exports

3,583

3,583

4,294

4,294

3,800

3,800

Feed and Residual

700

850

850

950

300

500

FSI Consumption

16,800

16,800

16,800

16,800

16,800

16,800

Total Consumption

17,500

17,650

17,650

17,750

17,100

17,300

Ending Stocks

1,245

1,595

1,189

2,189

1,089

1,339

Total Distribution

22,184

22,684

23,280

24,380

21,989

22,439

1000 HA, 1000 MT, MT/HA

Agricultural Policy

Turkey's total agricultural support budget is 10.1 billion TL ($4.3 billion) in 2015. The GOT allocated 3 billion TL from the total support budget to the livestock sector. Premium payments for grain, oilseeds, cotton and olive oil also reached 3 billion TL. Direct support payments (payments made directly to farmers based on farm land) are also about 3 billion TL. Moreover, the GOT has subsidized nearly 93 billion TL in credit for agriculture over the last 11 years.

The GOT plans to double supports to the pulses sector in 2015 to encourage domestic production and reduce imports, and thereby the foreign trade deficit.

Food Price Inflation

Food price inflation is a big headache for the Turkish government. The Central Bank of Turkey projected food price inflation at 12 percent in December 2014. Turkey's Consumer price index (TUFE) is 8 percent. The GOT established a committee for the evaluation of food and agricultural market in December 2014 due to concerns over the effects of inflation on food prices. The committee consists of the Undersecretaries of Ministries of Agriculture, Economy, Customs, Commerce, Development, and Finance; as well as the Undersecretary of the Treasury, Governor of Central Bank, and President of Turkish Statistic Institute. The committee will meet every 3 months and write a report about price fluctuations.

Inward Processing Regime

Turkey's Inward Processing Regime (IPR) is an export incentive system allowing Turkish manufacturers/exporters to obtain raw materials, intermediate unfinished goods that are used in the production of the exported goods without paying customs duty and being subject to commercial policy measures. Implementation of the IPR obliges the owner of the IPR authorization to export goods based on the import rights stated on the authorization. The basic purpose of the IPR is to ensure Turkish industries have access to raw materials at world prices, enhancing the competitiveness of Turkish exports.

For 20 years, Exporter Unions, consisting of export companies and authorized by the Ministry of Economy, have confirmed the export of the products that entitle the receipt of an IPR certificate. IPR certificates may only be issued after companies have exported production.

In the recent times, however, the Ministry of Customs and Trade has investigated the abuse of the IPR. Meanwhile, the Turkish Court of Accounts (Sayıştay) has also criticized the system for allowing the same people who benefit from the use of IPR certified imports to confirm their own exports.

With the notification published in the Official Gazette dated 10 December 2014, No. 29201, it is announced that exports will be confirmed by the Ministry of Economy instead of Exporter Unions - effective 1 January 2015.

Although some claim that the amendment will prevent abuse of the IPR, others worry about the possibility of rendering the regime ineffective.

TURKISH GRAIN BOARD (TMO)

TMO did not procure domestic wheat in 2014 due to significant decreases in the domestic harvest. However, a Cabinet of Ministers Decision published in the Official Gazette on April 19, 2014 authorized TMO to import 4.2 million tons of wheat, barley, rice and corn at a zero customs duty. In this scope, TMO imported 1.15 MT of wheat, 0.7 MT of barley, 8,000 MT of rice, and 40,000 MT of paddy rice