Turkey. Grain and Feed Annual. Apr 2014 April 11, 2014
Post forecasts Turkey’s production of wheat at 15.8 million metric tons (MMT), durum wheat at 1.9 MMT, barley at 5.8 MMT, corn at 4.9 MMT and rice at 740,000 metric tons (MT). Drought is still a big concern and has already affected wheat and barley in Central Anatolia and the Cukurova region in the South. Traders are optimistic due to recent rainfalls in March, but Post has observed problems with crop growth. The Turkish wheat market is still practically closed for U.S wheat due to genetically engineered (GE) testing requirements applied to U.S wheat only. Russian traders are hesitant to offer wheat prices to Turkey due to an expected price increase.
Wheat production is forecasted at 15.8 million metric tons (MMT). Central Anatolia, the Cukurova region, parts of the Black Sea and Eastern Anatolia are suffering from dry weather conditions. Durum wheat production is forecasted at 1.9 MMT.
Much of the region suffered from dry weather conditions after sowing. Wheat area remained the same compared to the previous year, but has decreased from the long term average. Wheat area has been declining in the region due to an increase in citrus and deciduous fruit area. Moreover, second crop corn production in the region has decreased dramatically for the last five years and is expected to disappear in the next five years. New irrigation projects to the North of Adana (Imamoglu) will open 75,000 ha for irrigation. This area will shift from wheat to first crop corn and cotton starting from 2015.
Wheat germination was late and a delayed harvest of 20 days is expected. The major problem in the region is high temperatures in March, which resulted in early head formation. The stem height is still short. Irregular germination also will cause low yields in the region. In some regions farmers have already replanted corn to replace lost wheat. Post estimates that there will be a loss of at least 20 percent of yield in the region, which may increase with the continuation of abnormal high temperatures.
Central Anatolia is also experiencing dry conditions. The most affected regions are Ankara, Eskisehir, Aksaray Nevsehir, and part of Konya. Wheat area, and especially durum wheat area, decreased in the region. Barley area increased due to attractive prices. Wheat area in the region will decrease, especially land with access to irrigation and corn and sunflower area will increase. The region has attracted a lot of dairy and feed lot investments. The demand to forage crops are high in the region and will continue to be higher. New big dairy plants established in Konya and Aksaray, and a big dairy and beef processing plant in Konya are under construction.
The major problem in Central Anatolia is late germination of around a month. This may increase as heat stress is a possibility in spring. Soil moisture levels are low compared to last year. The weather patterns in the region are very similar to the drought in 2007, but the availability of underground water is higher than it was then. The first week of March saved most of the wheat in the region, but there will still be a loss of around 25 percent compared to last year.
Another problem is the durum wheat area and yield. Durum wheat area decreased dramatically in the region and durum wheat was affected more than other wheat varieties.
The Thrace region and South East of Turkey have the best conditions at the moment for wheat growth.
The major problem in these regions is weak root development, but high stem height. This is already causing lodging.
Wheat planting in the region has been steadily increasing due to high second crop corn yields. The South East of Turkey was lucky in terms of weather conditions compare to other regions. Durum wheat area in the region decreased as in Central Anatolia. Plant development is favorable.
Due to new investments in the livestock sector, the price of raw feed material has been very attractive for farmers. Barley area increased in the GAP region and continued to increase in Central Anatolia reaching 3.4 million hectares (ha). Barley in the GAP region is in much better condition than in Central Anatolia. Dry weather conditions and low surface moisture damaged barley crops in Central Anatolia, especially in Konya, Ankara and the Corum region. Production is forecasted at 5.8 MMT. Dry weather conditions affected mostly barley and durum wheat in the region. Moreover there are some rust problems observed in the North East part of Central Anatolia that may damage the crop.
First crop corn planting has begun in Adana. A high cotton premium in 2014 (550 TL/MT) attracted corn farmers to plant cotton. There will be a 10 percent decrease in corn area in the Cukurova region. In the GAP region, most of the land cotton gained came from wheat. Corn production is forecasted at 4.9 MMT in 2014. Silage corn will gain land in the west part of Turkey, especially in regions around Izmir and Bursa.
The major concern for corn is the availability of water for irrigation. The water level at dams is low and is a big concern for corn farmers. The other problem is early hot temperatures that may put heat stress on plants. The temperature in Cukurova is already very high and has decreased soil moisture.
Rice planting will start in the middle of May and will finish by the end of the same month. MY 2014 planting area will increase due to increased profitability. Rice yields depend on rainfall at the end of August and early September. The harvest normally begins in September and ends in October.
Post forecasts rice production at 740,000 MT in MY 2014.
The Turkish Grain Board (TMO) and the Ministry of Food, Agriculture and Livestock (MINFAL) have been actively carrying out an awareness campaign to decrease the waste of bread. The campaigns to stop the waste of bread and increasing bran content have decreased Turkey’s consumption of bread. According to government sources, bread consumption decreased 10 percent from 35 billion loaves to 31 billion loaves. Traders are suspicious of these figures since their sales didn’t shrink. Traders estimated a 3-4 percent decrease in bread consumption due to the negative campaign against bread. Mostly city dwellers are susceptible to these types of negative campaigns which make linkages between obesity and bread consumption. It is very true that in metropolitan cities like Istanbul, Ankara and Izmir diet has shifted from bread consumption to protein based diets. But bread is still very important for daily life of the general population. Bread carries a lot of cultural value in Turkish society that is very hard to change, even with modern life styles.
TMO has been actively purchasing and selling wheat. TMO announced the wheat price on June 7, 2013 at 720 TL/MT for milling wheat and 765 TL/MT for durum wheat. On November 13, 2013 TMO intervened in the market by selling wheat first to flour and wheat products exporting companies, and then on November 14, 2014 opened their stocks to the general public.
Durum wheat demand has been very strong due to high levels of exports. New lines and new investments didn’t stop in 2013 and will continue in 2014. A recent joint venture company between the leading Turkish food producer and Japanese producer was announced, and recently leading pasta producer announced that they will build one of the biggest pasta production facilities in Ankara together with a Japanese company to produce pasta and noodles for the Asia market.
There has been strong competition in the domestic and export wheat flour and pasta markets. The driving factor is price. Turkish producers of both wheat flour and pasta are very aggressive on price competition, and Iraq and Africa are still their biggest markets. But recently, especially among pasta producers, there is a tendency to export to Japan and countries in the Far East.
A shortage of durum wheat in MY 2014 will be a major challenge for the sector. At the moment they have begun to purchase durum wheat from Canada and Mexico, and this import will continue. GM testing of U.S wheat imports will decrease the availability pasta producer’s suppliers.
Barley demand will again be very strong. New live animal farm establishments are still receiving government support and the GOT will continue to provide subsidized credit to them. Another important factor will be new supports to establish beef breed farms in Central Anatolia and East Anatolia. Moreover, wheat plant height is short and will likely be short at harvest, which will decrease the availability of straw and hay for animal feeding. This will increase barley demand. TMO recognized the problems the shortage of barley supplies and held an import tender for 100,000 MT on March 4, 2014. The import tender resulted in 50,000 MT.
Corn consumption is very strong due to high demand from the livestock sector, poultry sector and starch sector. There are five starch companies that hold production quotas, but recently four new factories were established without starch production quotas. The two new starch factories are in the Thrace region and in the South East. New factories put pressure on existing producers by either increasing or removing production quotas. This new development will change the demand for corn. At the moment, four factories only produce for export. They import corn under the inward process regime, process it, and export starch. This also increases Turkey’s corn import demand. Moreover, poultry and egg producers had another successful year, especially by increasing their export activities.
Domestic poultry consumption decreased 3 percent in 2013 because of negative publicity against poultry consumption. Medical doctors who have little background in nutrition, food science or related topics go on TV, including morning programs that are highly viewed by housewives, and alter the consumption patterns of families. The other group of consumers, who are usually classified as A class consumers, living in the cities with high revenues have become extra careful about their diets and have a tendency to eat fewer processed goods. They are showing a preference for boutique products. The most damaging statement against poultry was the alleged abuse of hormones in production. These doctors have express disbelief in the science behind the production of poultry and that new breeds have high performance converting feed into meat in shorter periods of time. Although domestic poultry consumption has decreased, poultry exports were very strong and are expected to be strong in 2014 as well. The poultry promotion group has targeted Japan as a new market for Turkish poultry exports.
The production of eggs has outpaced the production of poultry. Egg production increased 10.6 percent in 2013 and reached 16 billion 496 million units.
Total poultry production increased to 1.9 MMT in 2014 and is expected to increase to 2 MMT in 2014. In 2014, poultry exporters target 1.2 MMT in exports. Domestic poultry consumption was 20 kg in 2014 and is expected to increase to 25 kg by 2023.
Rice consumption is very sensitive to price fluctuations. With the U.S. dollar’s recent gains against the Turkish Lira (TL), rice consumption in the last four months declined and consumers switched to wheat.
Rice is commonly used to make either pilaf or stuffed vegetables. Rice has not been Turkish consumers’ first choice for meals and very quick to switch to other commodities.
The price of Osmancik rice increased from 2 TL in December, 2013 to 3.5 TL in March 2014.
In general, all commodity trade has been very slow since the beginning of 2014, and traders hope to have better trade opportunities in April and later on. The major problem is the drop in value of the TL against other currencies. Moreover, local elections in March and Presidential Elections in August have created concerns about the business environment. At the moment, traders would at least like to wait until the results of local elections before they begin to purchase commodities.
Wheat trade is slow at the moment. There are two major problems in front of wheat trade. One is the major supplier, Russia, is reluctant to offer prices to buyers. The second problem is that buyers are also reluctant to purchase wheat if prices are less favorable. Russian traders are also waiting to see the impact of drought conditions in Turkey.
Russian wheat prices offered to Turkey at the moment are 310 USD/MT for 14.5 percent protein and 295 USD/MT 13.5 percent and 285 USD for 13 percent protein.
Import permit licenses under the inward processing regime are 75 USD at the moment. They were sold at 90 USD 4 months ago.
Wheat stocks at the ports are not very strong at the moment, and more trade is expected in April.
The domestic wheat price is very high at the moment. The price of Anatolian red wheat is between 910-935 TL/MT, and the price of feed type wheat was 750 TL/MT at the Polatli Commodity Exchange on March 27, 2014. Prices are not only high for wheat, but also for bran which is at 670 TL/MT.
The price of barley is at 670 TL/MT, and the price of corn is at 700 TL/MT. Surprisingly, most traders expect prices to increase on grain. Traders believe that there is still a price margin, especially for raw feed materials.
The grain trade in Turkey mostly depends on keeping stocks until the end of price margins. Farmers have already sold their stocks and most stocks are in the hands of either TMO or traders.
TMO has been very active constructing new elevators. TMO has almost already completed the construction of 300,000 MT of new grain elevators, started 120,000 MT of new elevator construction, and projected 150,000 MT of elevator construction in 2014. Grain elevator construction has been very active within the last 4 years. More than 1.5 MMT of new grain elevator capacity was constructed during this term and there are still a lot new projects. This will increase the trading capacity of Turkey domestically and internationally.
The GOT continues to support the livestock sector through subsidized credit and premium supports. The livestock sector’s high growth rate is due to subsidized credit. The government decreased interest rates from 59 percent in 2003 to 8.25 percent in 2014. The government gave 7.5 billion TL at zero interest rate credit to the livestock sector between2010 and 2014.
The main problem facing the livestock sector is the low farm gate milk price. Most milk is sold at 0.7-0.8 TL/liter (LT) and the retail UHT milk price is 2.5 TL/LT.
The government announced the continuation of zero interest rates to the livestock sector. Moreover, they introduced new supports to beef farm establishments