Trends and opportunities

1. Opportunities
2. Tariffs, regulations and customs
3. The market

The market

Turkey is unique in the world market, in that it is one of the few countries self-sufficient in food production. Turkey has a far richer endowment of agricultural resources in terms of cultivable land and availability of water than any Middle Eastern country. Its great agricultural advantage is the conjunction of ample land with a variety of climatic conditions – all temperate-zone and Mediterranean climate crops can be grown, as can a number of sub-tropical crops. This abundance of climatic conditions makes Turkey one of the few nations in which such a variety of good quality crop and foodstuffs can be produced. Turkey is the largest producer and exporter of agricultural products in the Middle East and North Africa (MENA) region. Total market size (of agriculture) is estimated to be more than US$30 billion.

Crop output constitutes the majority (75-80 %) of the industry’s output, with the remaining 25-30 % coming from livestock. Given its extensively rich natural resource base and ideal climate, Turkey is a net exporter in agricultural products (excluding farm inputs), with the fruit and vegetable sector being the most competitive.

The market is increasingly opening up to a greater variety and volume of imports, and import levels are expected to continue to grow. The strengthening Turkish lira also means that foreign imports are increasingly affordable for farmers making imports increasingly competitive. Historically, the agriculture and livestock sector has been Turkey's largest employer (currently 30 % of the country’s workforce) and a major contributor to the country's GDP, exports and industrial growth. However, in line with the global trend, the industry continues to decline in importance relative to the rapidly growing industry and services sectors. This reflects the sector's inadequate productivity levels, which are largely the result of poor mechanisation, small farm size, and uncoordinated and unplanned agricultural production. Turkey has a vast agricultural resource base with significant potential to expand output, particularly through increased crop yields

To ensure its survival in Turkey’s changing economic profile, productivity through mechanisation; consultancy and improved animal husbandry must be improved to ensure competitiveness on a global scale and a stronger negotiating position for potential European Union (EU) membership. Utilising currently underutilised resources and skills will provide foreigners with opportunities for investment, as well as ensure the long term sustainability and growth of the industry.

While there is a high level of government intervention in the industry, in contrast to earlier programs of price supports, input subsidies and marketing monopolies, the most recent programs by government in support of the sector have been along the lines of privatisation of markets, reduction of agricultural subsidies, and the removal of trade barriers and the integration of Turkey into the global economy.

Opportunities

The Turkish market does present some challenges for potential investors and exporters but given the enormous untapped potential, as well as key indicators of change regarding market barriers and population changes, it also presents a rare opportunity, with the potential for ample returns, for exporters willing to commit to the market.

Some of the indicators that support the decision to export into the industry include:

• The growing demand for Westernised cuisine.
• The improving economy that is driving the trend for high value products.
• The increasingly changing regulatory environment, which is easing entry for foreigners.

A raft of recent reforms in the economy in general and the agriculture sector in particular have improved the investment climate for the agriculture and livestock industry. Investors originally active in other sectors are now investing in animal husbandry for breeding and milking, slaughterhouses for meat processing, farm modernisation, organic farming, food safety, etc. Moreover, more new farms are being equipped with modern machinery, as mechanisation becomes more widely accepted and affordable, especially in western Anatolia where farmers tend to be wealthier and farms bigger.

Since 2007, live dairy cattle have been imported into Turkey from Australia, New Zealand, USA and Uruguay. Additionally, with recent moves by the Turkish Ministry of Agriculture the import market for slaughter and feed cattle, slaughter sheep and goat and carcass meat have been opened. Turkey is now importing livestock from parts of the United States, Australia, Brazil, Uruguay, Argentina, Chile, New Zealand, Iceland, Norway, Estonia, Lithuania, Latvia and Hungary. The Turkish Government also has relaxed taxes on livestock and carcass meat imports. Reduced taxes for carcass meat (30 %) and lamb imports (20 %) are valid till the end of 2010 and reduced taxes on slaughter animal (30 %) imports are valid until April 2011.

However, the market expects that these time frames may get extended, which is why many international companies are establishing their branch offices in Turkey.

Private companies are investing in dairy farms due to the lack of good quality milk, hygiene concerns and anticipated global shortages. These new farms are all in need of dairy cattle. Close to 60-70 % of all milk production is sold without any proper processing. On the verge of EU entry, there will be more business opportunities in hygiene control of raw milk collection, processing, machinery and consultancy for production of dairy products. Beef cattle is expected to follow as the next step.

Turkey boasts the largest organically grown area in the Mediterranean region and is an open market for development, operating under the Organic Agriculture Law enacted in 2004 and modelled on the EU. It has attracted investment from France, UK and the Netherlands. Arable, pollution free lands make Turkey a prime location for organic production: 90 different varieties of agricultural products were organically produced in Turkey in 2002.

The South Eastern Anatolia Project (GAP) is Turkey’s largest regional development scheme seeking to make the region a major world exporter of agricultural products with close proximity to Middle East markets worth an estimated US$200 billion. It already hosts 50 % of Turkey’s cotton production. Indications are that there is wide potential for the supply of agricultural equipment; operation, maintenance and management services; as well as storage, sorting and packaging facilities.

Despite the industry’s enormous, as yet untapped, potential, Turkey’s agricultural productivity indicators are not at par with the international averages. In 2009, average wheat yield was 20 million tonnes in Turkey. These figures indicate the potential and the need for technology transfer and productivity improvements, which present a prime opportunity for overseas investors.

It is also worth noting that the strong economic growth in Turkey, increasing per capita incomes and the growing young population, as well as booming tourist sector, will further enhance the potential for success for Australian exporters. Given that Turkey has a consumer market of almost 72 million, Turkey presents a potential that other, more established, European markets may not offer.

While exporting into Turkey’s consumer market is more difficult than to other European markets, international products are becoming more widely accepted as per capita income and education levels increase. Young urban populations are also increasingly attracted to imported products, and young single women in particular are driving the trend for Westernised, processed foods.