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TMO’s appealing purchase prices revitalize wheat cultivation

11 October 20239 min reading

“The 2023 wheat prices set by TMO will further motivate our farmers to cultivate wheat. The determined price aptly reflects considerations for production, trade, industry, and the end consumers, ensuring the most balanced cost for a sustainable market. Fortifying its reserves, TMO has adeptly steered the market, curbing potential instabilities by judiciously safeguarding producers, manufacturers, and consumers alike.”

This season, Turkey’s wheat production surpassed expectations, bringing smiles to farmers and bolstering the grain industry. With record-high reserves, the Turkish Grain Board is a pillar of confidence for the sector. Against this backdrop, we engaged in a conversation with Hüseyin Emre Tekbaş, Chairman of the Association of Central Anatolian Flour Industrialists. Serving concurrently as the Vice President of the Turkish Flour Industrialists Federation (TUSAF), Tekbaş highlighted Konya’s potential in wheat production, underscored the significance of the flour industry, and shared insights on pressing industry topics.

Here are the responses from Mr. Tekbaş to our inquiries:

What are your expectations for the wheat yield in Turkey and the Konya Plain this year? How will this affect the flour industry?

Considering factors such as the expansion of planting areas, the patterns and volume of rainfall, and other regional determinants influencing yield, we project that Turkey’s wheat harvest will see a rise of 3.75%, reaching 20.75 million tons. We also anticipate a 7.5% increase in barley production, amounting to 8.6 million tons, compared to the long-standing average. Similarly, we have an optimistic outlook for the Konya Plain. Despite a decrease in snowfall, the balanced and ample spring rains lead us to predict an increased harvest, surpassing 2 million tons of wheat and over 1 million tons of barley. There were minor occurrences of hail damage in certain areas of the Konya Plain and instances of yellow rust disease owing to heavy rains. However, these were effectively addressed by our farmers with timely interventions.

Given that these regions are the ancestral grounds of wheat cultivation, a bountiful yield will positively benefit the flour mills that depend on wheat as their primary raw material. This will simplify access to raw materials, and our farmers will be able to capitalize on their crops locally. 

What are your views on the 2023 grain purchase prices set by the Turkish Grain Board (TMO)?

President Recep Tayyip Erdoğan has disclosed the purchase price for wheat in 2023. Based on this, the TMO will purchase red and white hard bread wheat from producers at 8,250 liras per ton, with an added premium of 1,000 liras making it 9,250 liras. Durum wheat will be acquired at 9,000 liras with an extra 1,000 liras premium totaling 10,000 liras, while barley will be priced at 7,000 liras with an additional 500 lira premium, bringing it to 7,500 liras. Every farmer registered in the Farmer Registration System (ÇKS) will be eligible to benefit from the supplementary premium based on their recorded production quantities in the ÇKS.

The wheat pricing for 2023 shared by our President will undoubtedly motivate our farmers to increase their wheat cultivation. The announced rate considers aspects of production, trade, industry, and end consumers, ensuring the most suitable price for a sustainable market. Global wheat prices have seen a decrease, moving from 350 dollars to 220 dollars, while barley prices have dropped from 300 dollars to 200 dollars. The decline in Chicago’s wheat futures is attributed to Russia’s anticipated high yields and the commencement of the harvest in certain regions. With world prices taking a dip due to the global grain corridor and increased yields, and with Turkey expecting a fruitful harvest season, the disclosed price meets market expectations and is poised to further encourage our farmers towards wheat cultivation.

Turkey is the top global flour exporter. It also claims the position of the world’s second-largest pasta exporter. Moreover, Turkey exports bulgur, couscous, semolina, and biscuits. Given the fierce competition in these sectors, it’s pivotal for our industrialists to remain competitive. Purchasing durum and bread wheat at elevated prices will impede competitiveness on the global stage, risking the loss of this crucial export market. While the TMO has set its purchase prices with a consideration that’s approximately 100 dollars above the global rates in favor of the farmers, it has also maintained a balanced approach by keeping industrialists in mind. It’s imperative that commodities like flour, pasta, and semolina, primarily produced from wheat, are made available to consumers at reasonable rates. It’s crucial for farmers to reap adequate profits to ensure consistent production. Similarly, consumers must be shielded from soaring food prices. In this light, we extend our gratitude to our President Recep Tayyip Erdoğan, our Minister of Agriculture and Forestry, İbrahim Yumaklı, and the TMO General Manager, Ahmet Güldal.

FLOUR EXPORTS SET TO RISE BY 30 PERCENT

How much of Turkey’s flour demand is fulfilled by Konya? How significant is the flour industry for Konya?

Turkey’s evolution in flour production has been marked by significant technological advancements from its past to the present. Flour, a primary ingredient for various foods, notably bread, is now being produced in various sectors, each with its own specific type and efficiency, thanks to modern milling techniques.

The Turkish flour industry, with its capacity and expertise, exports over 3 million tons, projected to increase by 30% in 2023 — and satisfy an internal demand of over 11-12 million tons. This not only ensures food security but also contributes nearly 1.5 billion dollars in export revenue to the Turkish economy. Continuing its growth with consistent and knowledge-driven technology, the flour sector has ensured that Turkey has never faced a flour supply challenge or shortage. This was most evident during the coronavirus pandemic when the market experienced no disruptions in flour availability.

TMO EFFECTIVELY STEERS THE MARKETS

With bolstered reserves, the TMO has adeptly navigated market dynamics, ensuring stability and warding off sudden swings by making judicious decisions that safeguard producers, manufacturers, and final consumers alike. Additionally, within the framework of flour regulation, the TMO’s efforts have provided the flour industry with affordably priced raw materials, thereby aiding in maintaining bread prices.

KONYA’S STAKE IN THE INDUSTRY

Konya, responsible for 10% of Turkey’s wheat output, has seen a significant growth and expansion in its flour industry. Housing 50 flour mills, the sector in Konya represents 12% of the food manufacturing industry and contributes to 17% of its employment. Flour manufacturers account for 2.4% of Konya’s entire manufacturing sector, and they represent 4% of its total employment. Annually, Turkey consumes about 12 million tons of flour. Konya, with its 50 mills, boasts an annual production capacity nearing 3.5 million tons, with a utilization rate that surpasses 70%. Effectively, Konya caters to approximately 17% of the nation’s flour needs. Furthermore, Konya’s exports, which encompass cereals, legumes, oil seeds, and their derivatives, are valued at around $300 million, contributing to 10% of the city’s total exports. Alongside, Konya has made its mark by exporting significant quantities of milling machinery to countries worldwide.

How do you rate the quality of Konya flour?

Konya is renowned for consistently producing above the average in every wheat variant it cultivates. The Konya flour industry boasts products catering to an upscale market, including varieties for baklava, cake, phyllo, and bread. These products have solidified their place as recognized brands across Turkey. This reputation of Konya flour is a significant advantage for our businesses as they venture into new markets. The flour sector, beyond being a cornerstone of food safety, stands as a paramount and dynamic industry both globally and in Turkey. On average, individuals in our country consume around 160 kilograms of flour and flour-based products annually. Staple food items in the Turkish diet, such as bread, pasta, and pastries, heavily rely on flour for production. This makes flour manufacturing a time-honored segment of agro-based industries in both Turkey and Konya. Companies that proactively address challenges, embrace technological advancements, bolster their financial strength, and operate with a structured corporate management tend to sustain and even expand their market share. In contrast, others witness a decline in their sectoral presence.

How do you assess the developments in the Black Sea grain corridor following Russia’s pullout?

Initiated under the guidance of our President, Recep Tayyip Erdoğan, the Grain Corridor Agreement, operational since July 22 of the previous year between Russia and Ukraine, witnessed two extensions in November and March. Due to the effective diplomatic efforts of President Erdoğan, the deal, set to conclude on May 18, secured an additional two-month extension. Yet, on July 17, Russia conveyed its decision not to renew the agreement, citing challenges like the Russian Agricultural Bank’s non-reconnection to the SWIFT system and insurance complications related to the transporting vessels.

As of now, this accord has facilitated the export of over 30 million tons of agricultural and food items from Ukrainian ports. Of these goods, 3 million tons were destined for Turkey, allowing access to grain products at favorable prices and helping maintain and even enhance its record export levels.

SUPPORT FOR RUSSIA’S MOVE INTO AFRICA

With Qatar’s financial support, Russia has announced plans to supply 1 million tons of wheat to impoverished African nations. This wheat is intended to be processed into flour in Turkey. We wholeheartedly hope this materializes, confident in our robust flour industry’s capability and experience to handle such endeavors.

The uncertainties surrounding the instigators and their motivations for the war are as clouded as ever. However, it’s evident that those same entities may attempt to thwart any progress aiming to mitigate the war’s impacts, doing whatever it takes to further their agendas. The resolution to the prevailing global food crisis, concerns of food security, soaring inflation, elevated energy costs, and challenges in energy accessibility fundamentally hinges on the indefinite extension of the grain corridor agreement. This would encompass Russian grain products, fertilizers, and their raw materials, facilitated by the establishment of an energy conduit via Turkey.

WHEAT PLANTING AREAS MUST BE EXPANDED AND OUR FARMERS BACKED

Do you have any final remarks?

To protect against global threats, we must strengthen our wheat production – a strategic commodity – ensuring its sustainability. With that in mind, it’s critical to gradually raise the wheat planting areas from their current 7 million hectares to 8 million hectares. Given the recent uplift in the intervention buying price and production incentives, our farmers, who have been showing a renewed interest in wheat cultivation, need continued support. Moreover, while advanced farming techniques are employed in the drought-prone region of Konya, promptly supplying the region with the needed water will undoubtedly benefit both the local area and Turkey at large. I hope the upcoming harvest season brings prosperity and abundance to all involved and to our nation as a whole.

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