Turkey revisits TMO tender buying remit amid surging prices

A decision to allow Turkey’s state-backed grain importing agency, TMO, to buy directly from governments or other state-backed companies – rather than via a public tender – is intended to lower import prices, trade sources have told Agricensus Monday.

The change was announced in the public gazette on Friday and allows a change to the tender rules that will allow the agency to contract directly via import product purchases via direct purchasing from other governments or from an approved list of companies.

“The thinking is that they wish to buy (imports) cheaper,” one Turkey-based contact told Agricensus.

For major importers, like Turkey or Egypt, the act of issuing a buy tender – often for hundreds of thousands of tonnes – will often result in a jump in prices as traders anticipate new demand entering the market.

However, the trade source highlighted that any heavy buying from any major importer is likely to firm prices.

“Any time TMO asks for offers, the market will jump up anyway… I’m also hearing that TMO is asking for offers already,” the trade source said.

The tender process – which was typically a two-tier process where best offers from the first round would be scrutinised before the agency pressed for discounts in a second round – could deny the association that cost-cutting step.

“It seems to me like buying without the reverse auction, just on a bid basis. TMO always benefitted from the reverse auction phase, i.e., the second round in their tenders,” the trader said.

Turkey has tweaked its import mechanism in recent months – a response in part to surging international prices and the collapse of the lira against the US dollar on international currency markets.

That dynamic has driven domestic inflationary pressures and led the agency to adopt a split process – often tendering for delivered corn separately from its efforts to tempt volumes away from domestic stocks.

The move also comes as two of the country's main suppliers – Ukraine and Russia – have seen supply profoundly interrupted after Russia invaded its neighbour on February 24. 

That has affected trade flows in the region, posing problems for every importing country across the region, amid physical blockades at major Ukrainian ports and sanctions affecting international trade.

Turkey last tendered to buy corn at the tail end of May, picking up 175,000 mt of corn on a deliver CFR basis, and 150,000 mt of corn on an ex works domestic basis, but the country also buys wheat, sunoil and other agriculture commodities via tender.

According to the Agricensus Tender Dashboard, the country issued at least 26 tenders in 2021, securing at least 209 cargoes and 5.7 million mt of produce at an average price of $327.32/mt.

To date, the country has issued 16 tenders in 2022, securing 162 cargoes and just over 3 million mt of product at $454.14/mt – a near 40% increase on the previous year.