Opinion

Hazelnut Production : U.S. and Azerbaijan are after Turkey

Hazelnut Kernel
United States
Published Jun 28, 2018
Increasing demand for hazelnut-incorporating food and growth potential as a source of biofuel lead consumers to question whether global hazelnut production can meet this demand. With recent adverse conditions in Turkey, U.S. and Azerbaijan are catching up the production. As of 2016, two nations account for 10% of global hazelnut production.

Hazelnut Production: U.S. and Azerbaijan are after Turkey

Along with the rising demand for general nuts, global hazelnut consumption has been increasing steadily. This trend is largely attributed to the growing demand for hazelnut-based snacks and spreads, and the increasing awareness for nutritional values of hazelnut.

According to Tridge, Turkey is the leading producer of shelled hazelnuts, producing 57% of the world, as of 2016. However, due to recent climate changes and production limits in the region, Turkish dominance in hazelnut production is falling. In order to meet the growing demand, hazelnut suppliers have diversified their sourcing. Hazelnut price spike in 2014, arisen from a frost in the Black Sea region, especially prompted suppliers to turn their attention from Turkey to other regions, including the U.S. and Azerbaijan


Rising Global Interest in Hazelnuts

Hazelnut is harvested annually between August and September by manual or mechanical raking of fallen nuts. Hazelnuts are best grown in temperate, warm climate. Turkey produces the most hazelnuts, and Italy, the U.S., and Azerbaijan follow.

Known for its crunchy taste and rich protein and vitamin E content, hazelnut is a key component in the confectionery industry. The Ferrero Group, an Italian manufacturer of branded chocolate and confectionery products, recognizes hazelnut as the most vital element in keeping their unique flavor. Long-standing best sellers od Ferrero - like Nutella, Kinder, and Ferrero Rocher - all contain high hazelnut content, which explains Ferro being the world biggest hazelnut buyer. After Ferrero acquired Nestlé U.S., a chocolate and candy maker in the U.S., in January 2018, it is estimated that Ferrero demand for hazelnut would continue to grow.

In addition to confectionery industry, Hazelnut is used in Turkish cuisine and Georgian cuisine, like the snack churchkhela and sauce satsivi. It also appears in many European desserts, such as tortes in Austria and dacquoise in France. Hazelnut oil is also used for cooking, medicinal purpose, and personal grooming.

Moreover, an increasing number of studies show that hazelnut shells have high potential to be used as an alternative fuel source. Hazelnuts are already used as fuel in north-western parts of Azerbaijan, the 4th largest hazelnut producing nation. A recent study conducted by the University of Talca positioned hazelnut shells as a good alternative to wood because of their matching calorific value (17.5 MJ/kg) in addition to other properties such as the efficient combustion of this material and the maximum cleaning to minimum ash ratio. 


Production: Competition Gets Intense

Source: Hazelnut production data provided by Tridge

The increasing demand for hazelnut-incorporating food and growth potential as a source of biofuel lead consumers to question whether global hazelnut production can meet this demand.

Turkey, Italy, and the U.S. are the top 3 producers of hazelnut. According to Tridge, despite a 35% decrease in production brought by frost on the Black Sea coast, Turkey garnered 56.5% of global hazelnut production in 2016. As Turkish hazelnut production fell, Italy and the U.S. expanded their production by 18.6% and 22.6% in the same year. Italy harvested 120,600 tonnes, while the U.S. cultivated 34,500 tonnes.

With a significant drop in Turkish production volume, global production of hazelnuts experienced a 20.3% decrease in 2015/16 with 744,000 tonnes. However, according to CEIC data, Turkish hazelnut production bounced back to record of 675,000 tonnes, up 60.7% from 2016 production, remaining its position as top producer in the global market.

Source: Hazelnut export data provided by Tridge

Though the U.S. is the third largest hazelnut producer, their export ranks outside top 10 due to high domestic consumption. Instead, Georgia follows after Italy in the export market. Georgia demonstrated a 36.1% increase in export quantity year-on-year in 2016. With 6.7% share in Georgian export, hazelnut represents largest agricultural export by value of Georgia. As Georgia supports hazelnut production and strives to make it more competitive in the international market, Georgian hazelnuts have high trade potential, shown in RCA index of 507.2, tridge data.

Azerbaijan is another market with high growth potential. In 2016, Azerbaijan ranked the 4th place in hazelnut production and export. Its export and production quantity both increased from the previous year, thanks to favorable weather conditions. As the main goal of the development of the agrarian sector in Azerbaijan is moving from ensuring food security to achieving competitiveness in export-oriented products, Azerbaijan aims to increase the area of hazelnut orchards to 40,000 hectares by 2018. 


Rising Demand in Asia

Source: Hazalnut import data provided by Tridge

Major importers of in-shell hazelnuts are Vietnam and Hong Kong. In 2016, Vietnam accounted for the top hazelnut importer and took 36.1% in global hazelnut import. As the second biggest global coffee producer, Vietnam imported USD 52.6 million worth of hazelnuts from the U.S., which were used to add hazelnut flavor in their coffee products.

The use of hazelnut works differently for Hong Kong, the second biggest importer. Biggest import partner of Hong Kong was also the U.S. with USD 19.4 million worth of imported hazelnuts. As a purchasing hub, Hong Kong does not consume all hazelnuts in the domestic market. Instead, over half of the imports are re-exported to Asian destinations such as China, Vietnam, and Taiwan. Since tropical climates Vietnam and Hong Kong are not suitable for hazelnut production, their import quantity continues to grow to meet domestic demand.

Among the top 10 importers, Italy has been experiencing a rapid downfall in import quantity of in-shell hazelnuts since 2014. This downward trend in import can be explained with an increasing amount of domestic production and a decreasing price of hazelnuts in Italy.

On the contrary, China demonstrated a significant rise in import quantity over a year. China has gained 163.8% increase in import quantity since 2015 and 114.8% increase in value. The surge in Chinese import can be explained by the advertising and promotional activities carried out by the Hazelnut Promotion Group (FTG) since 2001. FTG published its advertisement in the magazine of Air China, one of the 3 biggest airlines of the company, with the aim of increasing awareness of Turkish hazelnuts among Chinese consumers. Turkey held 99.8% of Chinese import in 2016. 


Exports to Grow from Niche Suppliers

Source: Wholesale price data provided by Tridge

Though global hazelnut price seems steady in the short-run, the market demonstrates a substantial volatility as Turkey, which accounts for about 56.5% of global hazelnut production and 62.2% of global shelled hazelnut export, experienced fluctuation in the wholesale price.

As the leading producer of hazelnuts, Turkey has been the price setter on hazelnut market. The recent climatic changes and production limits in Turkish Black Sea area contributed to price fluctuations in the past few years. Regions in Turkey that are climatically favourable to hazelnut production have reached maximum capacity, and the emergence of frost on the Black Sea region in 2014 and 2016 resulted in a huge loss in hazelnut yield.

Recent intervention of Turkish government in domestic hazelnut market might help reduce price volatility. In late April 2017, the state-run Turkish Grain Board (TMO) bought 25 tonnes of hazelnuts to aid struggling domestic suppliers for the first time since 2009. The return of TMO raised the price by 10% in two weeks, suggesting its effectiveness in stabilizing the price. TMO continues to play a significant role in Turkish hazelnut market by buying up excess supplies when the price drops and selling stocks when the market gets tighter.

Since hazelnut supply in the top producing nation faces constraints, suppliers have been exploring other sourcing regions. The recent activities of the Ferrero Group is an example. As one of the world biggest hazelnut buyers, it has been supporting hazelnut production in countries like Azerbaijan, the U.S., Chile, and Australia by establishing Ferrero Hazelnut Company in 2015. With an aim of uniting hazelnut supply chains, Ferrero Hazelnut Company acquires land for production, recruits farmers, conducts research on hazelnut cultivation and processing, and markets hazelnuts to other companies.

In addition to growth in supply, demand for hazelnut is also projected to rise continuously. The current expansion of middle class worldwide has prompted greater awareness of nutritional values of hazelnut. China, for instance, is transforming from export-driven to a consumer-driven economy, giving Chinese citizens more purchasing power to afford premium products like tree nuts and invest in improving their wellness. Increasing demand and supply all corroborate the recent expansion of global hazelnut market.


Contact Us:

Editor: Wonjung Yun / wonjung.yun@tridge.com

Sourcing Team Expert: Elly Lee / eunjeong.lee@tridge.com

Or request for quotation through: https://www.tridge.com/inquiry


References

1. https://www.ft.com/

2. https://ndb.nal.usda.gov

3. https://www.reuters.com/article/

4. https://gain.fas.usda.gov/

5. http://www.fao.org/

6. http://www.ftg.org.tr/

7. http://www.utalca.cl/

8. https://www.tridge.com/intelligences/hazel-nut

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