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Turkey’s Transition: A Window of Opportunity
By Susan R. Schayes
For years, Turkey aspired to be a hermit from the hubbub of world trade, producing and buying all of its goods domestically. This experiment in self-sufficiency began to change in the 1980s, when the country made moves to open its markets to the world.
But many restrictions still remain. The state was slow to privatize key commercial sectors, and to a large extent the agriculture sector failed to become efficient. Big Turkish farms remained under government ownership and imports of livestock were periodically banned.
Now, at the start of the millennium, that is all changing too. And, while Turkey’s market challenges, it also rewards.
Free Trade’s
Blessings and Burdens 
The road to freer trade is often a bumpy economic ride. On one hand, Turkey’s growth surpassed that of many of its fellow developed nations; it stands as one of the world’s 20 biggest economies. Two decades of open markets, combined with sustained economic growth, have brought dramatic changes for Turkey’s people. They have more income now, but they need more money. Inflation, which ranged between 70 and 100 percent a year, devoured most income growth, forcing more women to move into the workforce. Also, taste preferences and cooking habits are shifting dramatically.
The government isn’t standing idle, however. Turkey’s Central Bank and Treasury called on the International Monetary Fund and World Bank to help control the rampant inflation.
To revitalize the economy and break the inflationary pattern, the Central Bank and Treasure have just agreed to work with the International Money Fund and the World Bank. The agreement requires the Central Bank to slow exchange-rate depreciation and cool interest rates through less government borrowing and tighter fiscal policies.
One short-term result of this tough prescription, which began last year, is that imported goods may become less expensive relative to domestic goods. As more imported products appear on Turkish retail shelves, consumers are noticing their high quality and have begun to demand more choices. Turkey’s efforts to obtain membership in the European Union (EU) have also brought about changes in policies and regulations, which present both challenges and new opportunities.
Government Okays Blended Oils
While opening its market for trade was the biggest change, there have been smaller recent transitions in Turkey that affect U.S. exporters.
One occurred last year when the Turkish Institute of Standards allowed producers of vegetable oil to attempt an innovation–creating their own formulas of blended cooking oils. Previously, oils were branded and marketed according to origin, such as sunflower or soybean. The old policy was an extension of Turkey’s efforts to protect its domestic oilseed industry with high tariffs, ranging from 28 to 38 percent. Oil production normally drives the local crushing industry. With 180 plants and a total crushing capacity of more than 4 million metric tons, Turkey is a major processor and regional exporter of vegetable oils and products.
The new policy will primarily benefit the world’s soybean and canola producers. It is especially good news for U.S. exporters, whose soybean exports to Turkey reached about 242,000 tons in 1999.
Blended oils would afford price relief to Turkey’s beleaguered consumers. The blended brands may surprise their palates at first, but will certainly please pocketbooks.
Meal Also Doing
Well
U.S. soybean product exports had a boom year in Turkey thanks to many factors. There were favorable market conditions and attractive prices. The American Soybean Association’s marketing programs also helped. Another reason: the availability of FAS’ GSM-102 program, which helps finance over half of U.S. agricultural exports to Turkey. This program allows importers to maintain or increase U.S. sales in countries where financing may not otherwise be available.
U.S. soy meal exports to Turkey to doubled to 268,000 tons during1999 and increased again in the first six months of the new marketing year. U.S. soymeal alone captured more than 51 percent of the market, surpassing South American imports after many years.
Turkey’s dynamic poultry industry, which is by far the major user of soybean products, continues to expand at rates over 10 percent per year. To meet demand for economical and nutritious poultry feed, some producers, traders and oilseed processors are building new soybean crushing plants, an infrastructure improvement that presents obvious benefits for U.S. suppliers.
USDA’s Facility Guarantee Program, which provides financial backing for the building of trade-related infrastructure, is an important financing option.
Increased Opportunities for U.S. Corn
U.S. corn producers recognize that Turkey’s poultry industry, and expanded demand and production of high-fructose corn syrups, provides them with opportunities for U.S. corn, even though a variable duty which can range from 30 to 55 percent continues to restrain imports. The Turkish Grain Board recently used the GSM-102 Program to purchase 155,000 tons of corn. At close to 900,000 tons in 1999/2000, U.S. corn sales to Turkey were practically double their 1998/99 level.
Big Changes Down on the Farm
Policy changes on livestock can make a big difference for Turkish livestock producers–and for U.S. producers and exporters who sell to them.
Turkey’s minister of agriculture ended a three year ban on importing breeding livestock imports, a decision that could benefit both U.S. producers and Turkish consumers by increasing trade in livestock and improving productivity in Turkish cattle herds. Turkey would like to modernize this sector, so there are also increased opportunities for joint ventures and cooperation between the U.S. and Turkish livestock industries.
For the past three years, the United States, through FAS, allocated $40 million for the purchase by Turkey of breeder livestock and poultry breeder stock under GSM-103, another export credit guarantee program. With the lifting of the ban, this resource may now be used.
FAS funded an emerging markets office study on the potential for cattle breeding on state farms to help the U.S. livestock industry to new opportunities in this market. FAS also approved a Quality Samples Program to introduce three breeds of U.S. beef cattle to Turkish importers.
The Turkish government has already issued permits which would enable Turkish producers to buy about 7,000 head of breeding cattle. Several importers have already imported cattle, although not yet from the United States. European exporters have a geographic proximity advantage and can also offer lowed prices through export subsidies.
However, U.S. exporters feel certain that with additional exposure, Turkish importers can be persuaded to buy superior American genetics and infuse their stock with of the high productivity and profitability of the U.S. breeds. Turkey’s new Ministry of Agriculture programs, targeted at the livestock sector, should also expand interest in artificial insemination and embryo transfer.
Privatization and Potential
There is more good news on the policy front. The Turkish High Planning Commission has also facilitated the opening of this market by agreeing to privatize some of the 38 state farms (TIGEM). While the government originally intended to offer only a few of the farms for joint-ventures, the minister now appears willing to consider projects on almost all of them. Potential U.S. partners have expressed an interest in providing technical services and animals to develop the country’s dairy and beef cattle herds.
A Good Year For U.S. Cotton
Cotton represents yet another important medium-term opportunity for U.S. exports to this country. Although Turkey has embarked on a large, ambitious irrigation program in its southeastern region of Anatolia, cotton production increases have yet to be realized.
At the same time, the textile and garment industries have rebounded from last year’s depressed market, creating a need for imports of raw product.
The Turkish mills’ buying spree and domestic cotton shortfalls have forced economists to increase their cotton import estimates upwards to about 350,000 metric tons for 1999.
The import boom smiled on U.S. cotton. Turkish importers and their partners in the United States once again made good use of FAS’s GSM-102 export credit guarantee program. U.S. cotton sales for the first half of market year 1999 were 115,000 metric tons, making Turkey second largest buyer of U.S. upland cotton; only Mexico–a NAFTA partner–purchased more.
Talking Turkey About High-Value
While there are plenty of opportunities for consumer-oriented foods in Turkey, it should be noted that this is not an easy market. The country produces abundant agricultural commodities, has an advanced processing sector, and its consumers traditionally prefer fresh foods. Also, the government keeps a tight fist on imports through permit controls and food safety inspections. A good Turkish partner or shipping agent can often help new suppliers through a sometimes cumbersome regulatory process.
Most U.S. agricultural imports
have to go head-to-head with local competition and EU suppliers,
who enjoy logistical advantages and long-established business
relationships. With Turkey’s high rate of inflation, many
retailers want to stock small quantities, a buying pattern that
gives local suppliers an edge.
Still, opportunities exist in retail foods, as well as in the hotel and food service sectors. The wine and spirits sector,
protected for so many years, could also open soon.
Supermarkets have recently become popular venues, thanks to major investments and joint ventures between Turkish and European entrepreneurs. The customer base for these store is middle to upper income, mostly urban shoppers. They are familiar with Western-style foods and are drawn to specialty items. Like their U.S. counterparts, they drive to these modern warehouse centers or hypermarkets.
So what U.S. retail food products have potential in Turkey? Many U.S. products have a good image in Turkey and are welcomed by consumers. Recent studies indicate that specialty items, ready-to-eat foods and frozen foods continue to grow in popularity. With the right distributor or local partner, a U.S. supplier can find new niche markets. USDA generic and branded promotional programs, and the state agriculture departments and commodity trade groups, can also help suppliers in introducing products and developing a market.
Pet Foods a Plus
Most of the nation’s pet population, 300,000 dogs and 430,000 cats, live in western Turkey’s three largest cities: Istanbul, Ankara and Izmir.
Turkey’s domestic pet food production of a few hundred tons will not feed all the Fidos and felines. The rest of the $18-million pet food industry thrives on imports and is growing by 15 percent annually. And don’t forget those hard-to-buy-elsewhere exotics; monkeys and parrots get hungry, too.
Supermarkets are just starting to develop their own brands of pet foods, (even though they do sell private label foods for humans). A partnership with one of the supermarkets for a private-label product might bring opportunity for large-volume sales and would temper the high shelving fees and other charges required to introduce new products.
Most of the 1,200 tons of pet food imported from the United States is sold through pet shops and veterinarians. To win a market edge, it could pay to have a product that meets a particular animal health or nutritional need, such as foods for older or overweight pets.
Pet foods carry an 8.9 percent import duty (relatively low by Turkish standards), and like other food imports, must have a control certificate from the Ministry of Agriculture prior to shipping.
Screaming for Ice Cream
While ice cream consumption in Turkey is low compared to that of the nations of Europe, it is a growing market the United States has yet to tap.
This impulse (eating out) segment of the ice cream market is expanding at a rate of 10 percent per year, accounting for 60 percent, accounting for some $200- million in ice cream sales. Studies show that women tend to prefer a fruit flavor, while chocolate is the choice for men.
Other sectors of the ice cream
industries are growing, too. The take-home market is gaining by
15 percent annually, while the growth in catering is running at
20 percent. 
As with many other food products, import permits must first be obtained from the Agriculture Ministry, and the imported product will need sanitary and health documentation from appropriate U.S. government authorities.
_____________________________
Susan Schayes is the Agricultural Counselor at the American
Embassy in Ankara. Tel.: (90-312) 468-6110, ext. 2406; Fax:
(90-312) 467-0056; E-mail: agankara@fas.usda.gov
and homepage: www.usis-ankara.org.tr
Russ Nicely and Ibrahim Sirtioglu also contributed to this
report.
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