Policy Going Nuts

Turkey

Economic News

22 Jul 2010
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Amid growing controversy over unpaid debts and declining wholesale prices, Turkey's Hazelnut Growers Union (Fiskobirlik) has become the centre of growing unrest concerning the agricultural policy of the ruling Justice and Development Party (AKP).



Ever since producers rejected the government's candidate for leadership of the union this past January, clashes between Fiskobirlik head Salih Erdem and the government over hazelnut policy have become increasingly common.



Turkey is the world's largest producer of hazelnuts, responsible for about 70% of total production, the vast majority of which are exported to the EU. Production is concentrated along Turkey's Black Sea coast, primarily in the hilly areas between Trabzon and Ordu. Hazelnut production is the most significant economic enterprise in the Black Sea region, and as many as 400,000 growers are estimated to be involved in the sector. Most hazelnut growers have small plots and produce as a means of supplementing their primary income.



Tensions reached a tipping point in July, when Fiskobirlik failed to set a wholesale price or buy any hazelnuts from producers. The co-operative is presently in dire financial straits, and still owes producers some TL145m ($97.4m) from last year's harvest. Unable to get fresh bank loans, Fiskobirlik has put off making any new purchases, triggering a collapse in hazelnut prices. From TL7/kg ($4.70/kg) in 2005, prices have fallen to around TL2.5/kg ($1.68/kg), representing a massive loss of income for the country's hundreds of thousands of hazelnut producers.



While producers have been seeing red, exporters have been racking up impressive gains, with hazelnut exports in the 48 weeks from September 1, 2005, (the end of the 2005 harvest) totalling $1.91bn, according to the Black Sea Hazelnut and Products Exporters' Union. Turkey exports hazelnuts to more than 80 countries worldwide, though the majority (around four-fifths) goes to the EU, primarily Germany, Italy, France and Belgium.



In the past, the government shored up Fiskobirlik's finances as a means of supporting hazelnut prices, effectively allowing the co-operative to buy high, sell low and run up deficits. Direct state subsidies to the organisation were phased out in 2003, in line with the government's IMF-sponsored programme of fiscal austerity, designed to rein in the deficit and curb inflation. Fiskobirlik quickly ran up large debts, forcing the government to bail it out at a cost of TL1.9bn ($1.42bn) at the end of 2005.



Recep Tayyip Erdogan, the prime minister, ruled out any such action this year, telling growers they could "go knock on Fiskobirlik's door", while Ali Coskun, the minister of industry and trade, has repeated stated that the government has no plans to take on Fiskobirlik's debts.



Producers seem to see things differently, however. Fed up with government inaction, some 100,000 demonstrators rallied in Ordu on July 30 to protest the hazelnut policy adopted by the ruling AKP, blocking off the Ordu-Samsun highway for nine hours. In response to the protest, Erdogan and several leading ministers held a meeting to address producers' concerns, though so far the only action taken has been to sack the Ordu police chief for failing to disperse the crowd.



Hazelnut producers and opposition political leaders have accused the government of favouring business interests at the expense of farmers, pointing in particular to what they see as the pernicious influence of Cuneyd Zapsu, one of Erdogan's leading advisors.



Zapsu, a major player in the hazelnut export business and chairman of the board of the International Nut and Dried Fruit Council, has long been accused of guiding the government's hazelnut policy to suit his own interests, ignoring the needs of the country's thousands of hazelnut producers while raking in record profits from low prices. As one of the leading intermediaries between local producers and European buyers, Zapsu stands to profit handsomely from a drop in wholesale prices.



Zapsu has come under increasing fire in recent weeks from opposition parties and even members of his own parliamentary group, with AKP's deputy chairman, Nurettin Canikli, accusing Zapsu of acting like "a hazelnut speculator".



In a recent interview in English daily The New Anatolian, True Path Party (DYP) deputy head Saffet Arikan Beduk echoed the sentiment. "Buyers and intermediaries are trying to bring down prices to make more profit. The government didn't support the producers. The government's policy was in line with the wishes of middlemen working for importing countries." As for Zapsu, Beduk noted, "whenever you go to the Black Sea, cities and villages alike, they blame Zapsu for the fall in prices and for Fiskobirlik's problems".



Deniz Baykal, head of the main opposition Republican People's Party (CHP), has also tried to make political hay out of the hazelnut controversy of late, blaming Erdogan and Zapsu for the collapse of prices and promising, if elected, to reorient government hazelnut policy around producers.



Fiskobirlik has scheduled an emergency meeting for September 12, though producers are clearly hoping that the government will take action to rectify the situation before then.
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