Reduced Georgian Hazelnut Crop May Find Relief in Price Increase

Production Fall Short of Initial Expectations

The hazelnut harvest in Georgia has fallen short of expectations this year, with the Georgian Hazelnut Growers Association (GHGA) estimating it to be between 40,000 and 45,000 metric tons (mt). This is notably lower than the initial projections of 50,000 mt made at the beginning of the season. The lower estimate will be disappointing as most of the 2023 growing season was positive. Hazelnut areas received adequate rainfall, and the government subsidies provided improved orchard management for the most part. Despite this, at the end of the growing season, excessive rains during the harvest and the ongoing challenge posed by stink bugs led to decreased yields.

Source: GeoStat, GHGA, Tridge

Strong European Demand Expected

Over 80% of Georgia's hazelnut exports are directed towards Europe, with EU-27 countries accounting for over 70% of the market share. However, due to perceived quality issues, Georgian hazelnuts often fetch lower prices compared to the world’s top producer and exporter, Türkiye. During the 2021/22 marketing year (MY), concerns grew as 30 shipments were rejected at the EU border, primarily due to aflatoxins. Rejections fell to just eight in the 2022/23 MY. Despite this improvement, European buyers may still approach Georgian hazelnuts with caution, especially given the recent late-season rains and stink bug infestations. Stink bugs damage hazelnuts by feeding on the kernels, leaving them more susceptible to fungal infections.

Nevertheless, Europe's demand for Georgian hazelnuts could remain robust if Georgian producers can guarantee their product's quality. Global hazelnut production in 2023 could fall short of initial expectations of 1.29 million metric tons (mmt), as yields in Türkiye are also disappointing. This is leading to a rebalancing of supply and demand, driving prices higher. Hazelnut prices in Türkiye, which produces about two-thirds of the world's supply, have surged by up to 30% in USD terms, leading up to the harvest but dropping again for a net gain of 20% over the last three months.

Prices in Georgia have increased only slightly by 2% over the last three months. As tracked by Tridge, Hazelnut kernels in Georgia’s wholesale markets were trading at USD 4.89 per kilogram (kg) as of October 16. Prices in Georgia are bound to increase, given a worse-than-expected crop in Türkiye and the higher international price.

Long-term Production Goals and Government Subsidies

The GHGA set an ambitious goal last year to achieve a hazelnut production of 100,000 mt by 2025. Georgia's potential is evident in its 70,000 hectares (ha) of established hazelnut orchards. While modern commercial farms can yield up to 2.5-3 mt/ha, larger traditional orchards average only about 0.5 mt/ha.

In response to recent years' low prices and high input costs, the government has been offering subsidies of GEL 500/ha (USD 186/ha) since 2022 to hazelnut farmers with up to 3 ha. This initiative aims to enhance yields and elevate the quality of the produce. These subsidies initially showed positive results throughout the 2023 growing season. However, unexpected late-season rains, combined with stink bug infestations, diminished the benefits of improved orchard management, reversing much of the progress.

Significant investment in orchard management is essential to fully realize the potential yield of traditional orchards. An increase in hazelnut prices in the upcoming season may boost profitability, empowering farmers to make these essential investments. Consequently, this could elevate the production of smaller orchards and augment the country's overall hazelnut yield. Meeting the 100,000 mt target by 2025 is still theoretically possible, but it necessitates marked enhancements in managing these traditional orchards.