Big hazelnut buyers like Nutella are facing soaring prices as production in Turkey falls to lower than expected volumes

Lower than expected hazelnut production in Turkey is threatening to make products like Nutella more expensive for shoppers.

Farmers in the Mediterranean country, which is the world’s largest hazelnut producer, have been warning this season’s crop size is going to be lower than original estimates – which in turn is pushing global prices up.

Hazelnut stock prices soared more than 40% in the eight weeks to 27 September to $780/100kg, Mintec data showed.

“The price increase is indeed driven by shorter than expected production in Turkey,” said Mintec senior analyst Jara Zicha.

“The initial estimates from May/June this year came in at 720,000 to 810,000 tonnes. When the harvest started, farmers started reported much lower output, which has caused prices in Turkey to surge.”

The Turkish Ministry of Agriculture and Forestry pegged the 2023/24 crop size at 718,000 tones earlier this year, which would be a reduction of around 13% compared to last year.

However, traders have pointed to even smaller figures – as low as 620,000 to 650,000 tonnes – as farmers have faced the consequences of poor weather conditions earlier this year, as well as insect damage.

“This year’s harvest of hazelnuts in Turkey has resulted in slightly lower seasonal yields than expected,” said Swaroop Joshi, sales and marketing VP at hazelnut supplier Ofi.

He added the lower than expected volume of crops “has in turn resulted in higher prices”, but that “we believe the current supply is adequate to meet existing demand”.

“There are very few hazelnuts this year,” Kenan İncirkuş, a trader from Giresun, Turkey, also told Mintec. “We went to speak to farmers, and they all said the harvest would be much smaller than last year. We are seeing the effects of global warming, insect damage and, in particular, a lack of rainfall during the critical nut development period in May.”

The shrinking demand could become a problem for big hazelnut buyers, like Nutella’s parent company Ferrero.

Nutella, which sources the majority of its hazelnuts from Turkey, has already seen steep price increases in the past year as its other key ingredients – sugar and cocoa – have also seen significant global price hikes.

At £6.12, Nutella prices were up 11% on average across the retailers in the first week of October, compared to the same period last year, The Grocer’s own KVI pricing data showed.

In Asda alone, the popular spread was up 15% year on year.

Many contracts for the August season were agreed earlier this year at cheaper prices, so companies like Nutella may not end up feeling the impact of the current higher prices until next year, when the new contracts are negotiated.

“Presently, many packers and food manufacturers still hold stocks they bought earlier when prices were lower,” Mintec’s Zicha confirmed. “Hence, most will only start facing these high prices sometime next year.”

However, he noted that because Nutella was a “huge hazelnut buyer and dictates its own purchasing conditions”, he did not believe its buyers would face the same “soaring prices” as smaller businesses.

In the face of shrinking demand and higher prices, buyers will be “temporarily more active in the spot market, buying smaller volumes rather than contracting far forward and hoping that prices ease as the season progresses”, Zicha said.

“If the high prices were to stay, we could see some packers trying to substitute hazelnuts out of nut mixes.”

While new product development may be impacted as some look to reduce hazelnut content if prices persist, existing production of foodstuffs is unlikely to change due to the difficulty of changing ingredients at short notice, according to Ofi.

Ofi’s Joshi said the company remained “confident in the long-term outlook for hazelnuts, thanks to long-term growing demand-side trends and some of the farmers in our sourcing network reporting higher yields over time since working with our agronomists”.