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Announcement Concerning the Sector Inquiry to Be Conducted in the Hazelnut Market

Competition Board (the Board) decided to conduct an ex officio preliminary inquiry in order to evaluate the claims which occasionally come into the public agenda and find coverage in press and which suggest that the undertakings operating in the hazelnut buying market were engaging in anti-competitive practices. As a result of the preliminary inquiry conducted based on that decision, the Board took another decision on 03.11.2016 stating that launching an investigation on the sector was not necessary since no documents/information was found to support the aforementioned claims.

However, the relevant Preliminary Inquiry Report on the hazelnut sector includes certain observations and evaluations, which are listed below:

1) Hazelnut production is an important economic resource for the whole Black Sea Region, particularly the Eastern Black Sea area. This sector has been the subject of significant structural changes in the recent years, with large impacts on the fragility of the sector and on the revenues of the producers. Due to rural depopulation, most hazelnut producers, who grow their crops on fields smaller than a certain size, are living in cities and metropolises far from the production areas. This situation prevents hazelnut production from being their main occupation, and hazelnut income from being their main income. It is observed that this has led to delayed and insufficient agricultural activity in the production areas, especially in the Eastern Black Sea.
2) In addition to a lack of agricultural activity, another factor affecting hazelnut productivity is the aging of the cultivated hazelnut fields, causing a decrease in the productivity of hazelnut orchards. Due to the aforementioned factors hazelnut productivity in Turkey has fallen significantly below the numbers in European countries and USA, in spite of the fact that hazel is a native plant in Turkey. This situation naturally is reflected on the hazelnut yields, with particularly low average hazelnut harvest from unit area in Eastern Black Sea in comparison to US and European countries.
3) On the other hand, rural depopulation in the regions where hazel is cultivated has led to an increase in labor costs, which in turn leads to a decrease in the economic productivity as well as yield productivity in hazelnut production. Low yields and increasing production costs, in particular labor costs, has resulted in hazelnut producers deeming market prices insufficient.
4) In addition, due to government subsidies related to hazel cultivation, in the last 30-40 years hazel substituted many agricultural goods in the fruitful flat plains around Samsun, Düzce and Sakarya provinces, where large hazel orchards have been established. These fields are suitable for irrigation and mechanized agriculture, and they lead to significantly higher production and economic yields in comparison to the Eastern Black Sea area. Hazelnut producers have better cost advantage in the Western Black Sea due to land conditions, which is reflected in hazelnut income and this plays an active role in the complaints of Eastern Black Sea producers related to hazelnut purchase prices.
5) Another important structural failure of the sector is the fact that Licensed Warehouses have not yet been implemented. Lack of sufficient storage facilities at the individual or organizational scale result in the hazelnut harvest being stored under unsuitable, primitive conditions, or in the producers consigning their harvest to wholesalers known as “greengrocers” for storage. It has been found that switching from the Consignment System, which has become the general market practice, to a Licensed Warehouse system would be beneficial for the sector and the producers, both in terms of improving the storage conditions for hazelnut and in terms of preventing price fluctuations.
6) When examined from the point of view of industrialists and exporters, the consignment system leads to the wholesalers having more of an effect on the prices than producers, despite serving as an intermediary in the supply chain. While the producer can only store his goods for a shorter period of time with an expectation of higher prices due to limited storage facilities, wholesalers are able to buy into the higher price expectation for a longer time period.
7) It is clear that the most important factor affecting hazelnut prices is hazelnut yields. For that reason, many actors operating in the market, from producers to exporters, strive to affect prices through yield estimations. However, these speculations will be reduced to a considerable extent, since it has been announced that from this year on, yield estimations will only be made by the Ministry of Food, Agriculture and Livestock.

Following all of these observations and evaluations, the Board has decided to launch a sector inquiry in the hazelnut market in order to examine the subject in a more detailed and comprehensive manner. The goal of the sector inquiry is not only to identify issues which may carry the nature of a violation in the market under the Act no 4054 on the Protection of Competition, but also to investigate the sector from a competition policy perspective. Therefore, the sector inquiry in question is planned to include solution suggestions for the structural problems, in order to ensure that the sector can achieve a more sustainable competitive structure.