The pandemic that started in 2020 and its effects, the interconnected or independent economic and financial developments in the world and in Turkey, the Ukraine-Russia war and the grain markets Grain corridor and its consequences Earthquake and its aftermath, Turkey and the flour industry as an earthquake region, Lack of supply in grain production and climate change, Supports applied for the election and its effects on the flour industry, Production, Foreign trade and competition problems Grain storage, Russian grain policy, capacity utilization.
The pandemic that started in 2020 and its effects, Interconnected or independent economic and financial developments in the world and in Turkey Ukraine-Russia war and grain markets The grain aisle and its consequences Turkey after the earthquake and the flour industry as an earthquake zone Lack of supply in grain production and climate change Supports applied for selection and their effects on the flour industry Production, foreign trade and competition problems Grain storage, Russian grain policy, capacity utilization.
The first four issues that I have mentioned here under the headings are strong enough to destroy a sector alone. Let's see to what extent this has been felt with numbers and what kind of fiction can be made on future expectations. The flour sector, which has made itself felt in domestic and foreign markets as a professional organization in exports since 2010 and has become the world leader in foreign trade, has become more valuable both in value and price. In the foreign trade, which will be examined in detail below, in 2016, an income of 1.095 million dollars was obtained in return for 3,573 million tons of exports, and 983 million dollars were obtained from the flour export, which was 3,070 million tons in the amount due to the effects of the pandemic. After the serious decreases in unit prices in 2020, the supply problems and logistics bottleneck after the Ukraine-Russia war, which started on February 24, 2021, increased the general level of prices of goods prices in the world and in Turkey. These effects became more pronounced in 2022 and reached 1.547 million dollars with a record increase in value. This value is a record. In return, 3,164 million tons of flour have been exported.
During the pandemic process, the industry really did not experience any problems in the supply of flour on the shelf and in the oven. We can even say that it was too early to show an example. It set an example for other sectors with a very good communication strategy that steers the public sector and dominates the field. It provided the necessary supply not only to the domestic market but also to the export markets. In the autumn months of 2021, when the pandemic process started to ease, interest rates were lowered twice in a row, inconsistent with macroeconomic policies, and the fluctuation in the financial markets, which tripled the exchange rates, marked the beginning of a new era in the goods and services markets. This situation reversed all the agricultural and food policies carried out up to that date. The Ukraine-Russia war had a lagging effect on the flour markets. Due to the fact that it was before the harvest period and public-civil society cooperation, its impact was limited at first. However, the price movements and the fact that the expectations turned negative with the intensification of the war caught the countries in need of imports with insufficient stocks and the very rapid increase in imported grain prices.
From the grain corridor, which started with 268 thousand tons on 1 August 2022, 1,234, 1,296, 811, 1,078 and 802 thousand tons of grain and oilseed shipments were realized until 31 January 2023, respectively. A total of 5,489 thousand shipments are respectively; 23.90% Spain, 17.3% Turkey, 7.9% Bangladesh, 7.1% Italy, and 6.2% Indonesia. To the other underdeveloped and poor 15 countries in Africa and Asia, 1,622.6 thousand tons of shipments were made, amounting to 29.5% of the total, ranging from 200 thousand tons to 6.6 thousand tons.
In the process of establishing the grain corridor, which came into force with Turkey's diplomatic efforts, we made intensive contact with the ships waiting at the ports, the type and quantity of the traded goods and the sector stakeholders, both Ukrainian and Russian professional organizations, traders and buyer countries. provided. As a result of the information conveyed in lists, agreements were signed and the process started. Here again, alternative policies have been produced by us and shared with the public, in response to Russia's hesitations to send tradable products to developed countries rather than to countries in need. The most important of these was the first Russian Grain Exporters Union and the Russian Commercial Consultancy, as SMS. We have been informed that this proposal will be appropriate and will be forwarded to the relevant ministries. Suggestion; Using the 8.5 million tons of warehouse capacity in Turkey, the grains to be delivered from Russia to be delivered to the countries in need are for export by grinding using the idle capacities of the flour industry. We are happy to see that this proposal was transferred to the Turkish side after the approval of the ministries and turned into a common policy set. Internal processing regime and agricultural support policies will now have to be redone. Previously, the foreign market grain market prices were more favorable than the domestic market, but now it has reversed. In an environment where the grain supply could not meet the domestic demand, the whole burden was reflected on the public as a Treasury duty loss, as a result of the suppression of bread prices due to the increase in import prices due to both the exchange rate level and the pandemic and logistics problems.
As a result of this structure, there was also a loss in public tax revenues, which resulted in the zeroing of customs duties. The gap between the two has widened so much that the public has had to sell supported wheat to flour industrialists in order to keep the bread prices low while keeping the purchase policy prices very high. In the 2022/23 harvest period, there was a thought that the grain purchase policies before the election would increase the expectation of the farmers to increase the cultivation areas and a good harvest would be achieved compared to the previous year, but until February, there was a great concern. Whatever happened, this happened with the onset of cold weather at the beginning of February, when the drought ended and the snowfall spread to the whole country. 10 cities suffered a major disaster with 7.8 and 7.6 magnitude earthquakes. Covering 10 cities affected by the earthquake; There are 128 Flour Mills in total, 15 in the Eastern Anatolia Region, 56 in the Southeastern Anatolia Region, 55 in the Dicle Region and 22 in the Çukurova Region. A total of 600 active flour factories in Turkey are working at 55% capacity. Factories in the earthquake zone constitute 25%. We have learned that about 10 factories were damaged in the earthquake zone. There are also pasta, bulgur, feed and starch factories in the region. Some feed mills were also damaged and calls were made to supply the region with feed. It has been observed that both flour, feed and other dry food donations are made by professional organizations, but bread is sent directly because there is a problem in the operation of the bakeries.
PRODUCTION AND IMPORTS
The fact that the grain production statistics are only known as estimates constitutes the biggest bottleneck in the determination of policies. In this context, the United States Department of Agriculture (USDA-WASDE) and the International Grain Association (IGC) are among the most reliable sources in the world regarding country statistics. Therefore, confidence in current flour and pasta production statistics is both delayed and questionable. Grain production information is mostly based on foreign trade data, which is seen as reliable, and efforts should be made to determine policy, production, consumption and stock levels accordingly.
By the way, here we see TUIK statistics at the end of 2019-2021. We see that the total part of the production amount resulting from the situation in 2021 and the milling of bread wheat and others is 12,166,650 tons and this is provided by 396 production facilities. When we compare and evaluate this information with other information, it seems to be incomplete. On the one hand, TOBB statistics show us 535 production orders, on the other hand, production facilities hold more than the allocations given by Turkish Grains. In addition, it is not specified whether these data cover production for export. Those on hand, with estimates of manager observations out-of-hand, based on 12 million productions, and those observing bran and fires reveal that previous bread and durum wheat production will be around 15 million in 2021, not including imports. These levels are; We hope to give the necessary message to the public administration, policymakers and professional organizations.
It shows us that wheat, corn and barley imports have reached a high plateau, 12.5-14.0 million tons in total since 2019. In this period, there was a sharp decline in productivity and production due to both the climate crisis and the decrease in cultivation areas. When we look at the distribution of imports on a country basis during this period, Russia and Ukraine come first with 60% and 30%. We see that the destination and amount of imports from other countries move within 10%. With a total of 13.252.253 thousand tons in 2022, the second-largest grain import was realized after 13.905.353 thousand tons in 2019. In return, while a payment of 3.079 million dollars was made, this figure increased to 4.899 million dollars in 2022. In the meantime, unfortunately, it is possible to see the effects of the pandemic and war on world wheat prices between 2019-2022.
When we look at the structure of the countries and the amount in terms of bread wheat imports, Russia's share was 70%, while Ukraine had a share of 24% on August 1, thanks to the possible grain corridor, despite the war. In a total of 8.630 million tons of import, 6.123 million tons of wheat from Russia, 2.040 million tons from Ukraine and 90 thousand tons from Moldova were purchased. Moldova, Bulgaria, Kazakhstan, Lithuania, and Latvia, like other countries, has been important importing country in the last 4 years. Unusually, wheat imports from Argentina and Brazil were observed in 2022. What is interesting here is the import from Brazil despite the high unit price. Brazil is a Latin American country that imports wheat, mostly from Argentina.
When we examine the import of durum wheat, while it was 192 thousand tons in total, there was a sharp decrease in 2022 in Turkey, which made purchases from Canada until 2021. Imports from Mexico and Russia in 2022, instead of Canada, draw attention. Other countries where durum wheat has been imported in the last 4 years are Greece, Syria, Kazakhstan and Lebanon. In the last two years, the partial increase in the yield and production of durum wheat, as well as the increase in the use of bread wheat in pasta production, plays a role in the decrease in imports of durum wheat compared to bread wheat.
EXPORTS
In the foreign trade, which will be examined in detail below, in 2016, an income of 1.095 million dollars was obtained in return for 3,573 million tons of exports, and 983 million dollars were obtained from the flour export, which was 3,070 million tons in the amount due to the effects of the pandemic. After the serious decreases in unit prices in 2020, the supply problems and logistics bottleneck after the Ukraine-Russia war, which started on February 24, 2021, increased the general level of prices of goods prices in the world and in Turkey. These effects became more pronounced in 2022 and reached 1.547 million dollars with a record increase in value. This value is a record. In return, 3,164 million tons of flour have been exported. While Iraq, Syria, Yemen, Somalia, Angola, Palestine, Benin Djibouti, Kenya, Ghana, Tanzania, S. Leone maintain their long-term market shares in total exports, Venezuela, Sri Lanka and Cuba have drawn attention as important countries in the top 15 in recent years. While Iraq's long-term rate is around 40%, other countries have had a 10-15% export share, especially Syria and Yemen, and other countries have a 2-5% export share over the years, depending on their importance. In the last 10 years, the export amount has been over 3 million tons at all times, except for the years 2013-2015, while an income of over 1 billion has been achieved in other years, excluding the pandemic period. As we mentioned above, due to the increase in unit prices and the improvement of logistics problems, the revenue reached the level of 1.547 million dollars. The development of export markets in Angola, Ghana, Djibouti and Benin, which are located in the African continent, was realized due to the market research carried out by professional organizations and the industry at that time. In this context, the cooperative efforts of the commercial consultancy of the public sector also played an important role. While exports of both Kazakhstan and EU 25 countries were close to the 2 million tons and 1 million tons limits, respectively between 2010 and 2013, Turkey remained alone in the leadership by making 1/3 of the world's flour trade, which totaled 11-12 million tons. In the following years, Kazakhstan experienced decreases in its exports due to the decrease in the share of Uzbekistan in border trade, while EU25 countries lost their African export markets to Turkey. Market research work for flour industry companies is carried out professionally by the firm "Sustainable Milling Solutions" (SMS). Please contact info@turkishflour.org for your requests and our offer. Market research in Angola, Ghana, Djibouti and Benin was conducted by SMS.
Pasta export has gained serious momentum in the last 10 years, similar to flour export. Global markets are more permanent and reliable than flour exports. In addition, as in flour export, it is not only a market like Iraq but it is in a structure that spans 3 continents. In addition, these markets include densely populated and developed market structures such as China, Japan and the USA. Venezuela, Japan, Ukraine, Senegal, USA, Syria, Lebanon, Israel and China are noteworthy among the countries that made a leap in 2022. With this structure, the pasta industry has approached the psychological limit of 1 billion dollars.
GRAIN IMPORTS, WHEAT AND PASTA IMPORTS ACCORDING TO THE FOREIGN TRADE REGIME
We present here the information on the grain and wheat markets, taking into account the analysis to be made on the basis of the foreign trade regime and taking into account the warehouse and free zones. Import restrictions brought about by the problems experienced in foreign markets due to both the lack of supply and the climate crisis have led to the reduction and removal of customs duties in the last four years. It is possible to observe these developments in the table below. In the years when the tax was abolished, imports of up to two times were realized in domestic use, except for DIR conditional imports. There was also a double increase in domestic usage subject to the same trend warehouse regime. When we look at the general grain and wheat imports within the framework of these data, no significant deviation is observed. Imports made by TMO are included in the import figures. DIR Conditional Exemption-Import with Export Registration Customs Aptrepo Regime-Import for Domestic Use Without Exemption-Domestic Use Import to Free Zones-Domestic Use
FLOUR INDUSTRY AND CAPACITY USES BY REGIONS ANALYSIS OF THE EFFECTS OF EARTHQUAKE ON SECTOR
The detailed analysis, in which we will provide more detailed information on the sectoral size and the number of active flour mills, which we have estimated above, will show us more clearly the industrial capacity and its effect on the total sector in this region and in 10 cities where the earthquake was effective. The sector has a total structure of 31-33 million tons. Although the active flour industry is listed as 600 or more in TOBB and TUIK records, both the actual usage statistics of the companies in TMO and the number of factories that are members of the associations indicate that more than 90% of the production is made by around 400 companies. In the last ten years, excluding the pandemic period, the average capacity utilization is around 45-55%. It has been observed that capacity utilization in the pandemic returns up to 65-70% on average. Considering this information and assuming that Adana, ŞanlıUrfa, Diyarbakır and G.Antep cities were less affected by the earthquake compared to other provinces, we will try to show the impact analysis, production capacities and employment dimension. The capacity of provinces where destruction is high is 1,111,680 tons. For the least affected cities, the loss is thought to be 1,337,582 in total. It should be noted here that the loss of capacity is not only due to damage. it will also be due to regional market losses, infrastructure problems, and energy and logistics problems. In general, this loss will be 2,449,262. Of course, it can be assumed that this loss will recover after the completion of the restructuring works in the region and the return to normal life. In total, it is thought that the effect of the region on the Turkish flour industry maybe 15.8%. However, considering that the flour industrialists in other regions are working with idle capacity, it is thought that the effect may be more limited for the general flour industry. Export market losses and impacts can also be expected to be limited. The biggest factor in this is the low number of companies that export intensively among the most affected cities. According to TUIK statistics, the total agricultural production areas of the 10 provinces affected by the earthquake its share in its fields is 16%. 16% of the total field crops production areas, 15% of the vegetable areas and 25% of the fruit production areas belong to 10 provinces.
We can look at the importance of the earthquake zone as wheat and other grains by region. In terms of production, cultivation areas and yield, the Southeastern Anatolia region is in the 10-15% band. It is noteworthy that around 50% of durum wheat production is met from the region. The provinces where the earthquake occurred are not part of the Southeastern Anatolia Region and Çukurova Region. The provinces where the earthquake occurred are not part of the Southeastern Anatolia Region and Çukurova Region. Therefore, a partial effect can be observed. However, the information below, as TUIK statistics cities, is more enlightening for the years 2017-2021. If we take bread wheat as a basis, we see that 3,275 thousand tons of 14,500 thousand tons of production in 2021 was produced in 11 provinces. The region, which corresponds to a rate of 22.5%, shows its importance both in production and in the flour industry. In the statistics consisting of cereals: corn, barley, rye, oats, sorghum, spa, and dar, the total production in the region in 2021 was 12,984 thousand tons, while the regional production was 26.6% with 3,463 thousand tons. It is of great importance for the region to benefit from state support as soon as possible before the 2023/24 harvest period. Although the news that there was no significant damage to the Flour, Pasta and Feed factories is pleasing, the losses in agricultural equipment and silos and the impressions from the countryside and villages are that long-term policies are needed instead of temporary daily aid. Although the region seems to be predominantly plant-based, animal husbandry also accounts for 10% of the GNP. Heating, energy and feed supply remain urgent problems. The other dimension of the problem is that if the solution to the problems is not found urgently, it will result in evacuation in the rural areas in the first days when immigration from the region is encouraged.
Source: Email/GFMM
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