(Bloomberg) -- Rising prices and the collapse of the lira are prompting Turkey to tap international markets to secure wheat supplies and ward off food-price inflation as part of efforts to get the nation’s economy under control.
The Turkish Grain Board is planning to issue international tenders to buy the grain, according to an official at the country’s state buyer. The purchases may be made immediately after next week’s Bayram national holiday, he said.
Benchmark wheat prices in Chicago have climbed by about a third this year amid concerns over supplies after drought and extreme weather hurt crops in the top grain-exporting nations. A correction in prices over the past two weeks has already attracted major importers to the market, with the world’s biggest buyer, Egypt, taking the unusual step of accelerating purchases by tendering for two deliveries.
Turkish flour millers, local traders and the state grain board met Wednesday to assess the market situation, the official said. While the board, known as the TMO, hasn’t decided on the timing and the quantity of the wheat purchase, it’s working on the tender procedures, he said.
Turkish importers are under extra pressure after the lira renewed its slide Friday to trade near a record low against the dollar as a deepening rift with Washington plunges the economy into turmoil. Turkey has undertaken a series of measures to try to stabilize prices and rein in double-digit inflation.
Releasing Stockpiles
To shore up wheat supplies, the government has allocated 750,000 metric tons of imports to be duty-free until May 2019. The decree is a step toward "attaining price stability in the market," the board’s Chairman Ismail Kemaloglu said in a tweet earlier this week.
The TMO has also started the process of selling domestic wheat stockpiles, the official said. The move may forestall hikes by domestic sellers, who are seeking to raise prices in lira to match more expensive dollar-denominated grain.
“Domestic prices are expected to increase after Bayram in line with international prices,” said Gulfem Eren, chairwoman of Turkey’s Grain Suppliers Association.
The purchases by the TMO would be part of an effort secure supplies for local companies and curb inflation, Veysel Kaya, the founder of Sunseedman, a consultancy and brokerage based in Edirne, Turkey. All signs point to TMO being “at the scene with the international tenders soon,” he said.
Turkey, the world’s top flour exporter, imported about 6.2 million tons of wheat in the year ended June, according to International Grains Council estimates.