THE GLOBAL WINDOW OF TURKISH FOOD AND AGRICULTURE The Global Window of Turkish Food and Agriculture Sector
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Turkey and Iran Grain imports increased hugely year-on-year in August 2021, while large exporters such as the US or Brazil, and major importers like China or Spain, were receding. As Turkey and Iran are very arid countries, they necessarily rely on Grain imports to add to their Grain production. Domestic production in these countries is crucial to maintaining a sustainable trade balance, meeting domestic consumption, serving feed purposes, and more. In 2021, however, Turkey and Iran—like the rest of the Middle East—faced severe droughts which impacted Wheat and Barley domestic crops, two of the most strategic agricultural products for these countries. Consequently, Grain imports rose amid a global market facing supply issues, relaunching the temporarily calm bull market.
Turkey’s Tactical Grain Imports Move
Grain imports are essential to Turkey since domestic production is insufficient to ensure its status as one of the world’s largest Wheat Flour producers and exporters. This is why Wheat is a key crop in the country. However, the production of Grains in 2021 suffered vastly from droughts. Consequently, production estimates were lowered for both Barley and Wheat due to the lack of rain, particularly during critical growth periods.
Figure 1: Turkey Precipitations Between Jan & Sep 2021
Between April and June 2021, precipitation in Turkey only exceeded 50mm twice, most often moving around the 25mm line. The insufficient amount of rain directly impacts the volume and quality of the Wheat produced, thus leading to more Grain imports required.
Figure 2: Turkey Monthly Import Volumes Between Jan & Aug 2020 v. 2021
Indeed, Turkish imports between January and April 2021 remained below or at the same level as the 2020 import volumes. However, concerns started to arise around the domestic production in May 2021, likely explaining the 6.5% increase in May 2021 imports compared to 2020. Grain imports surged in July 2021, increasing by more than 80% YoY, continuing into August 2021 with a 186% increase YoY.
Russia is the primary origin for Turkish Wheat Imports. However, by the end of June 2021, Russian Wheat production estimates started indicating a significantly reduced supply in 2021/22. This was only confirmed later in July 2021 with a further decrease in August of the same year, leading Russia Wheat FOB prices to surge as a result. Additionally, although Ukraine has a large crop in 2021/22, making the product more price-competitive against Russian Wheat, Turkey is limited by protein level. Indeed, the Russian product has higher protein content, which Turkish Wheat millers require.
Figure 3: Turkey Monthly Wheat Import Volumes Between Jan & Aug 2021
Monthly Wheat import volumes, shown in Figure 3, echo those in Figure 2, with July and August 2021 being the most significant monthly volumes of Wheat imported in 2021. Assuming that not all Russian Wheat buyings are executed in spot windows (as it takes four days to ship from Russia to Turkey), Turkish actors had already seen Wheat prices and export tax rising in July 2021 (world-grain.com). Therefore, they bought Wheat in July 2021 for August shipments to curb costs and the high tax variability.
Source: www.agflow.com
