The Italian confectioner’s agribusiness coordinator Daniel Dellacha met with Azerbaijan’s Minister of Agriculture Haydar Asadov last week.
It comes as the hazelnut supply in the top producing nation Turkey faces constraints.
The Azerbaijani minister said in a press release, growing conditions in his country were favorable for hazelnut production.
"The state grants preferential loans to hazelnut producers, and hazelnut seeds are distributed to farmers free of charge. This opens up new plantations and opportunities for further increase of hazelnut production [translation]," he said.
Turkey produces around 75% of the world’s hazelnuts each year.
Azerbaijan accounted for 4% of annual production in 2014 (29,796 MT), making it the world’s fifth largest producer behind Italy, Georgia and the US, accoding to FAO data.
Azerbaijan’s production is growing at 4-5% per year on average, according to the Azerbaijan Hazelnut Exporters Consortium.
Production is concentrated in the foothills of the Caucasus Mountains in the regions of Qakh, Zaqatala and Balakan.
Turkey’s declining production excepted to pick up
Jara Zicha, market analyst at research firm Mintec, told ComfectioneryNews: “Hazelnut prices in Turkey, the major global supplier of hazelnuts, have been on a declining trend lately.
“Prices climbed temporarily in May after the Turkish government intervened to support the nut market, but overall, during H1 2017 prices have been under downward pressure from high stocks and weak TRY (Turisk lira).”
However, she said weather has been favorable in Turkey for the upcoming crop. Mintec expects hazelnut production in Turkey will grow between 10% and 15% year-on-year in 2017/18.
Ferrero’s hazelnut operations
Hazelnuts are one of Ferrero’s key commodities, which it uses in brands such as Ferrero Rocher, Nutella and Kinder Bueno. The company is the world’s largest hazelnut buyer.
Ferrero acquired Italian hazelnut company Stelliferi & Itavex in 2012 and has since looked to a vertically-integrated hazelnut supply chain with more company-owned plantations.
The chocolate group also acquired Turkey-based company The Oltan Group in 2014 – the world’s largest hazelnut processor.
The chocolate firm set up the Ferrero Hazelnut Company in 2015, which acquires land for production, conducts agri and processing research and sells, and markets hazelnuts to other companies.
Ferrero’s hazelnut company owns farms in Chile, Argentina, Georgia, South Africa, Australia and Serbia and has hazelnut processing capacity in Chile, Italy and Turkey.
Ferrero’s 2,600 hectare hazelnut plantation in Agri Australis, Australia – setup in 2011 - is expected to yield 5,000 metric tons annually by 2020.
The farm was established to provide a counter-seasonal supply to Turkey. It expects its first harvest in April 2018, reaching full production by 2022.
Traceability and Turkish production
Ferrero aims to have 100% traceability for its hazelnut supply by 2020. The group had roughly 5% traceability by the end of 2015.
Ferrero said in its latest corporate social responsibility it was focussing on traceability because “there is no internationally recognised sustainability certification” for hazelnuts. UTZ began a three-year project to develop hazelnut certification in 2014.
Ferrero has previously moved to secure a hazelnut supply outside of Turkey.
In 2014, Ferrero signed a memorandum of understanding with the Serbian government to increase the country’s hazelnut growing area from 1,000 hectares to over 10,000 hectares by 2020.