Lira slide shifts Turkish wheat, flour trade flows

Turkey's wheat imports have shifted patterns, despite an overall steady pace, while its flour exports face new challenges, as local producers struggle to obtain feedstock with the lira plunging to record lows.

The lira had been slowly weakening for several years before significantly accelerating its decline in November, after the country's central bank cut interest rates in the face of rising inflation, aiming to strengthen Turkish exports and boost investment. The unorthodox approach has so far failed to curb inflation, while the lira reached a low of TL16.4:$1 on 17 December. Despite rebounding to TL10.6:$1 on 24 December, at the time of writing the lira has again crept down to TL13.3:$1.

Turkey's state-run grains agency TMO will continue purchasing grains regardless of further potential weakening of the lira against the dollar, Goktay Donmez from agribusiness firm Agrozan Commodities told Argus. But private-sector buyers have already halted purchases bound for Turkey, he said.

Turkey this marketing season has already shifted its focus from Russian wheat imports to Ukraine, despite its historic preference for Russian origin 12.5pc protein content wheat. The switch was partly caused by Russia's steadily rising wheat export duties, which motivated Russian exporters to ship wheat to Turkey and store it in the country's grain silos, Agrozan Commodities' country manager for Russia, Sabina Sodikova, told Argus. TMO is thought to have booked some of these volumes in its recent tenders priced on an ex-works basis. At the same time, Turkey was also heard to purchase Argentinian wheat in late November — a first since at least the 2011-12 marketing year.

While Turkey has sufficient grain stocks for the first half of 2022, and the suspension of the import duty on grains is likely to remain in place until June 2022, Donmez said.

Turkey's grain imports in the 2021-22 marketing year are projected to increase notably on the year following poor domestic production, with the US Department of Agriculture pegging the country's wheat, corn and barley imports at a combined 17mn t this season (see chart).

Flour exports affected

While Turkey's wheat imports have remained unaffected by the lira's plummet, its flour export sales — which are the highest in the world — have slowed significantly, as increased crush margins are unable to offset the local price hikes in wheat, according to Donmez.

Russian flour has switched to a discount to Turkish product on fob basis, which hampers Turkish flour exports.

That said, in July-October — the first four months of this marketing year — Turkey's export shipments of flour have increased by 1.77pc on the year, reaching 1.16mn t, compared with 1.14mn t in July-October 2020. Iraq has been the largest export destination for Turkish flour historically, and in July-October 2021 received 45.92pc of all Turkish flour exports, amounting to 531,500t of product. Syria, Djibouti and Yemen are the next three largest importers of Turkish flour.

A weak lira could facilitate the export of already produced flour while hampering fresh production by impeding wheat purchases by private-sector buyers. Turkey's flour exports were projected to reach around 3mn t this calendar year — more than a quarter of global exports of product and largely unchanged on the year, according to estimates from the Turkish Flour Industrialist' Federation earlier this year.

By Anna Sneidermane

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