Economic assessment of hazelnut production and the importance of supply management approaches in Turkey

Abstract

Turkey is the world's leading producer accounting for about 70% of world hazelnut supply. Hazelnut production is the single most important economic activity (monoculture) and income resource of rural households in the Black Sea Region. Hazelnut sector is supporting since 1962. However, due to inappropriate policies a stock problem has arisen in the sector. The Government has intervened to over production problem with various regulatory measures since 1989. However, results of supply response model showed that legal regulations have not any significant effect on reducing over production. Annual rate of increase of hazelnut production was calculated as 4.48%. And long term sup-ply elasticity was found as 0.09 by Nerlove Model. The inelastic supply restricts the interventions on market by support price mechanism. However, high support prices and purchase guarantee keep farmers in hazelnut farming and encourage them to expand their production area. Monoculture is the most destructive factor which reduces all supply management initiatives. Government is both trying to keep farmers income at a certain level by high support prices, and also trying to apply supply control measures. This situation leads an intervention dilemma and creates a vicious cycle in hazelnut sector. Due to importance of Turkey in World hazelnut trade, it is necessary to solve over production problem in order to stabilize domestic and world prices. This research showed that the most effective way to supply control is to differentiate hazelnut farmer's income sources in order to encourage them to reduce their production area.