Turkey Can Be The Key Locatıon in Wheat Trade
06 June 201421 min reading
Muhammet Uğur Kaleli:
Konya Commodity Exchange Chairman
The Chairman of Konya Commodity Exchange as one of Turkey’s most important grain exchanges, Muhammet Ugur Kaleli said that Turkey can be the key location in the international wheat trade due to its geopolitical position and its production potential and for this; firstly necessary storage systems for the infrastructure should be applied as soon as possible.
Regarded as the granary of Turkey, Konya achieves a major success by spreading the strength it gets from production to all the industry branches related with the grain industry. Providing significant contributions to the development of the grain industry in the province and offering many innovations into the service of farmers and industrialists, Konya Commodity Exchange (KTB) is one of the first exchanges of Anatolia. Leading to the establishment of other exchanges in Turkey, KTB today has a service net consisting of one headquarter and 11 registration offices. Continuing to expand this service net day by day, Exchange is carrying out serious work in order to bring international standards to the commodity exchanges in Turkey and make Turkey be one of the leading centers of world grain trade.
Saying, “Turkey has the potential of being the key location in the international wheat trade due to the geopolitical location. For this, firstly necessary storage systems for the infrastructure should be formed as soon as possible. Konya Commodity Exchange pulls out all the stops regarding this issue.” Konya Commodity Exchange Chairman of the Board Muhammet Ugur KALELI answered our magazine’s questions on commodity exchanges in Turkey, activities of Konya Commodity Exchange and licensed warehousing.
Mr. Kaleli, firstly what is exchange market? Could you give us information on the historical development of exchanges in the world and in Turkey?
We can define the Commodity Exchanges as the agricultural product markets where standardized or separated products can be represented with samples and real market rate is formed by supply and demand’s coming together in a specific place and time within the competitive conditions. The products whose market prices are determined in the Commodity Exchanges should be the ones which have high trade potential, are resistant and suitable for being stocked, whose supply and demand is changeable, whose purchase and sale is free and made over a predetermined minimum amount.
The history of exchanges dates back to the 14th century but it goes back to 1200-1500 B.C. The fair realized by the Romans and Phoenicians laid the foundations of the first exchange. The invention and then use of bill in the 12th and 13th centuries started a new age. The official usage of the exchanges started in the fairs of Middle Ages. Purchase and sale transactions that can be considered as the pioneer of the modern exchange market technique were made in Burges in the 15th century. As known one of the largest exchanges of today, New York Stock Exchange maintains its importance with its purchase and sale transactions.
Historical roots of the modern commodity exchanges in our country dates back to the Ottoman Empire’s Tanzimat Period. The establishment process of the commodity exchanges has the similar properties with today’s institutionalized structures within the chambers of commerce. Constituting the basis of our modern trade exchanges, Regulations for Public Exchange (Umumi Borsalar Nizamnamesi) was made in 1886. The first commodity exchange was established inn Izmir on 14 December 1891 and Konya in 1901, Adana in 1913, Antalya in 1920, Edirne and Bursa in 1924 and Istanbul Trade and Grain Exchanges in 1025 followed it.
Enacted in 1950, the law numbered as 5590 for the commodity exchanges gave its place to The Law of the Union of Chambers and Commodity Exchanges of Turkey and the Chambers and Commodity Exchanges numbered as 5174 that was accepted on 18 May 2014. There are currently total 113 commodity exchanges in our country as of June 2014 58 of which are in provincial centers and 55 of which are in the district centers. The duties of commodity exchanges determined pursuant to the Law numbered as 5174 are regulating and registering the purchase and sale of the materials included in the exchange, determining and announcing the daily prices of the materials included in the exchanges, determining the responsibilities of the buyer and the seller in terms of receipt and delivery and payment terms, determining the general rules valid in the exchange transactions, arbitrating disputes, making price communication by following the domestic and international commodity exchanges and markets, establishing laboratories and technical offices in order to determine the types and properties of the materials included in the exchanges, determining and announcing the customs and manners of the exchanges. The persons dealing with the purchase and sale of the materials included in the Commodity Exchanges have to register to the exchange. Commodity exchanges are site managed public organizations pursuant to the democratic principles.
What are the benefits of the commodity exchanges for the buyer, seller or the consumers?
Exchanges are the markets in which producers supply their products to lots of buyers and thus sell their products safely and with real prices under the conditions of that day. This is the most important advantage of the commodity exchanges for the producer. As it is known, only registered members can enter to the commodity exchanges and make transactions there. The only exception of this limitation is the agricultural product manufacturers. Thus, a great part of the seller in every exchange consists of agricultural producers.
The fact that agricultural products produced by the (manufacturer) farmer reach to their actual values within the current conditions of the market decreases the financial burden undertaken by the government due to the supporting policies in the agricultural industry. Thus, commodity exchanges primarily mediate to the products for reaching their actual values. Besides, formalization of the informal economy is ensured with the registration of the agricultural and animal products’ purchase and sale to the exchange and thus government’s losses of withholding and tax and VAT avoidance and evasion are prevented. Commodity exchanges stabilize the fluctuations that cannot be predicted. The businessman gets rid of the risk by making futures purchase in accordance with the delivery date and the amount of the goods he guarantee in the commodity exchange.
Commodity exchanges provide advantages to the exporters as well. The producers operating and exporting in the industry branches like textile get the possibility of realizing their export commitments on time with the desired quality and price by making futures purchase contracts.
Benefit for the consumers is protecting their interests. In other words, commodity exchanges contribute to the fair and actual price formation proper for the consumer interest by compensating the price differences of the agricultural products with widespread production and consumption partially in terms of region and time.
Could you tell about Konya Commodity Exchange?
Opened in 1901with the decree of Sultan Abdul Hamid Khan but stopped operations in 1914 together with the World War I, Konya Commodity Exchange became operational again on 24 October 1924 with the decree numbered as 1041 with the sign of Mustafa Kemal Ataturk. Being the first exchange of Anatolia and pioneering to the establishment of other exchanges, Konya Commodity Exchange is spreading its service network consisting of one headquarter and 11 registration offices day by day. Having an important place in the region’s economy today, became Turkey’s largest grain exchange as Konya is the granary of our country. Our exchange continues to give service to its members and our producers with its advanced infrastructure and specialized personnel. Being among the exchanges with the largest trading volumes, Konya Commodity Exchange increased its trading volume to 9 billion 300 thousand kilograms that is approximately equal to 7,5 billion TL by increasing 35% in 2013.
Having a council consisting of 29 persons and a 7-person board of directors, Konya Commodity Exchange’s active member number is now 1489. At Konya Commodity Exchange in which there are 10 profession groups including grain producers, legumes producers, feed producers, livestock breeders, red meat producers, fleece producers and leather dealers, seeders, flour producers, dairy farmers and food manufacturers; grain products, legumes, feed crops, various materials like cumin - fenugreek – soapwort, textile materials like angora wool – fleece, livestock, livestock products, raw leather, oil seeds, vegetable oils and fruit kernels are traded.
What is the role of commodity exchanges in rural development and industrialization?
When the development level of the agricultural industry in Turkey is taken into consideration, it is seen that commodity exchanges both increase their numbers and contribute to the economic development functionally. Their role on registering the economic activities, contributions to the rural development and industrialization together with their increasing trade volumes make the presence of the commodity exchanges even more important. However, it is really important that commodity exchanges strengthen themselves technically on the subjects of laboratory and sales centers within the rapid change in the global economy, yield in agriculture is increased and the businesses are encouraged to reach the modern scale size allowing specialization. In this respect, taking precautions that encourage the preference of commodity exchanges would both increase the efficiency of the exchanges in the economy and provide a positive contribution to the economic development of our country in the integration process with the EU countries.
Besides the benefits of the commodity exchanges such as the formation of the market prices, price stability, reducing the uncertainties in the market, risk diversification and sharing; their contributions to the country economy via the data banks provided for macroeconomic plans are also important functions.
In the markets where the competition environment are created via Commodity Exchanges; the producer shall make a move according to the productivity in other factors such as seed, fertilizer, medicine and etc. by realizing that qualified product is traded over its value and the quality is important in the production, not the amount. Producer’s income would increase, he would have insurance facilities, thus would cause increase in our country's level of welfare. The competition environment to be created with the development of Commodity Exchanges and the information circulation provided by this would ensure producers to act in unity in terms of maximizing producers’ interests. The merchant would ensure the formation of the price by estimating the supply and demand projection of the product in the market in terms of quality and amount and storage of the product; he would reduce costs for the government from these points. The competition chance of the agriculture-based industries that have the possibility of supplying input in the market conditions with the development of the Commodity Exchanges would increase in the world markets. Agriculture-based industry would provide the industry relief from uncertainties by making long-term production and sales plans together with the increasing competition power.
You are the first exchange that started electronic sales transaction. Could you please give information on the exact date when this project was implemented, the sales amounts of the last year and the sales amounts to be reached this year?
Purchase and sales transactions are made in the electronic environments in the agriculturally developed countries. Therefore, the products brought to the exchanges are traded over their value in the increasing competition environment. For this reason, Konya Commodity Exchange put Electronic Sales Hall into service with the first gong of our Minister of Foreign Affairs Prof. Dr. Ahmet Davutoglu on 18 may 2011 by breaking new ground in Turkey. The products brought to the exchange via Electronic Sales Hall started to be traded faster and safer in a more competitive environment over their actual values. The hall sales significantly increased thanks to the trust provided by the Electronic Sales Hall to the farmers and tradesmen. The hall sales, which were 232 thousand tons equaling to 110 million TL in 2009/10 season and 250 thousand tons equaling to 132 million tons in 2010/11 season, were realized as 590 thousand tons of products equaling to approximately 400 million TL in 2011/12 season and as 665 thousand tons equaling to 502 million TL in 2012/13 season with the electronic sales hall. There is an increase of more than 3 times within the two years. 1 million 550 thousand tons of wheat, 140 thousand tons of barley, 180 thousand tons of corn and 30 thousand tons of legumes and totally 1 million 900 thousand tons of products have been traded in KTB Electronic Sales Hall till June 2014. The monetary value of this amount is approximately 1 billion 250 million TL. Not only the farmers in Konya, but also the ones from other regions of the country desiring to sell their products have started to apply to Konya Commodity Exchange.
What BorsaKonya Electronic Platform formed by you will bring?
BorsaKonya Electronic Platform is the second big step of Konya Commodity Exchange. Opened by our Customs and Trade Minister Hayati Yazici, BorsaKonya Electronic Platform is put as a transparent and global market model in the agricultural trade.
In BorsaKonya Electronic Platform where electronic product receipts drawn in the licensed warehouses will be purchased and sold; besides the domestic transactions, the countries in the close geography will be allowed to make transactions. Also, establishment of “Specialized Products Exchange” that will operate on the international scale and realize all the transactions in the electronic environment is one of the objectives. With the system to be applied; the products will be traded with more realistic prices via exchanges, our tradesmen and industrialists supply the product with the amount, kind and quality they demand more easily and safe. The product will be protected from the price differences, risks will be reduced and trade volume will increase via the receipts. A share from the global capital will be obtained and savings will have a safe place on the national scale. The implementation has a great importance in terms of the integration of the agricultural industry and financial markets. Thanks to the product specialized market, our country will be the center of our region’s agricultural products trade. The aim of Konya Commodity Exchange is to be a global actor whose agriculture, agricultural trade and conscience is strong.
9 commodity exchanges were given electronic product receipt purchase-sale authority by the Customs and Trade Ministry until now; only BorsaKonya is active among them. The infrastructure of the electronic purchase-sale hall cost 1 million dollar was made ready for ELUS Platform with an additional investment of 400.000 TL. Gaining a new understanding to the agricultural trade with BorsaKonya Electronic Platform in 2013, KTB agreed on the purchase-sale of Electronic Product Receipt (ELUS) with the licensed warehouses in Kirikkale, Sivas and Sanliurfa after Mersin with BorsaKonya Platform. Thus, the warehouse volume of BorsaKonya reached to 303.000 tons in total. When it is taken into consideration that there is 603.000 ton-capacity in total for licensed warehousing activities in Turkey, it is understood that how extensive are the contracts of Konya Commodity Exchange.
What is the status of your licensed warehousing activities as Konya Commodity Exchange?
Konya Commodity Exchange conducts the infrastructure works of the “Product Exchange” system. The project conducted for Licensed Warehousing System as the first most important step of that is at the stage of being realized now. 100 thousand ton-capacity of licensed warehouses with 300 thousand tons of capacity in total will be put into service in 2014 harvest season. In today’s world where not only the agriculture, but also the trade of the agricultural products has become important; there will be a significant change on licensed warehousing under the roof of ASLIDAŞ Lisansli Depoculuk Anonim Sirketi. With this change; our producers, tradesmen, industrialists and government will have great amenities and gains. Agricultural trade is not regional now; it has gained a global structure. Besides agricultural production, the companies and governments dominating the agricultural trade are a step forward.
Licensed warehousing system is successfully applied in many developed countries especially in U.S. today. Huge increases are provided in the agricultural production, trade, employment, in competition with the world, contribution to the national income and thus tax revenue of the country in which this system is applied. The countries that fail to apply the system become the secondary market of the developed countries applying this system and their share from the production and trade of agricultural products decreases day by day. Turkey has the potential of being the key location in the international wheat trade due to its geopolitical position. For this; necessary storage systems for the infrastructure should be applied as soon as possible. Konya Commodity Exchange pulls out all the stops with this thought. Taking all these steps as soon as possible is a vital requirement in the EU membership process of our country. Neither the producers nor the decision makers have sufficient data on the effects of switching to a common agricultural policy with EU. It is obvious that the activities on this subject would make contribution to the interested parties for seeing the future. Turkey whose negotiations with the EU still continue, should try to overcome the negative effects of the participation process by choosing proper policies. If this process is gone through with completely rambling policies without making effect analysis studies like that, irreversible consequences may arise. It should not be forgotten that if the necessary developments on the subjects such as quality, standard, productivity, licensed warehousing, product exchange and futures transactions in order to move forward the wheat industry in Turkey are not applied on time; the damage from this process for our country, region and Konya whose basic cycle is based on grain and wheat will affect not only the industry but also the whole society.
Could you give information on your laboratory services? KTB laboratory has become Seed Registration and Certification Centre. What can you say about that?
Konya Commodity Exchange Laboratory KLD has been maintaining its activities under the name of Konya Laboratuvar ve Depoculuk A.S. since 2008. Internationally recognized methods of analysis are used in the laboratories. Food control laboratory prove the quality in its studies by being accredited by Turkish Accreditation Agency and has become an international laboratory. Konya Commodity Exchange KLD Laboratory in which any kind of food, leaf, soil and fertilizer analysis; is also the quality provider laboratory in wheat and wheat flour. KLD laboratory whose name is associated with trust and quality in its services together with its authorized personnel, electronic infrastructure and internationally recognized certificates signed the protocol of opening authorized classifier branch in Kirikkale and Sivas. Providing monotony in the analysis together with the development of licensed warehousing is significantly important. In this respect, the cooperation is an important step for the development of the industry.
Seed growing is realized in Konya on 550 thousand-decare currently. 34% of the certified seed production 38% of the wheat seed, 60% of the barley seed is made in Konya in Turkey. Large production parcels, availability of the irrigation facilities in many regions, large production areas suitable for isolation in the pollinated plants especially like sunflower and corn are important factors in terms of production. The facts that day-night temperature differences in Konya Plain provide suitable conditions for the production of qualified seed and working in harmony in seed production are important advantages in terms of Konya’s seed production. Konya Commodity Exchange is in a constant effort for the establishment of “Seed Technologies Valley” due to the reasons that companies producing seeds are in large numbers, trained manpower, climate and terrain is suitable for the production of the seed.
In Konya that has an extensive seed growing industry in Turkey, it is really important to prepare especially the grain seed as soon as possible and put on sale. Therefore, the authority of establishing and operation Seed Registration and Certification Centre needed in Konya was given to Konya Commodity Exchange by the Food, Agriculture and Livestock Ministry. Fulfilling the necessary investment and international criteria for that, our exchange will make seed registration and certification procedures in its Authorized Laboratory with its professional staff. Thus, the seed registration and certification procedures are made in the areas where the seed is produced and time and source loss of the producer is prevented.
What does quality mean in wheat? “Not the amount you produce but the quality is important now” phrase belongs to you. Could you explain this phrase? What do you do for this subject?
Quality and standard in wheat are two main issues in terms of the agricultural and economic future of the wheat, our province and our country. When we evaluate today’s situation from these two perspectives, it is seen that our country is among the self-sufficient countries with its approximately 20 million-ton wheat production annually (except for the dry years). However, quality in our wheat production changes by years and unfortunately it has not reached to the desired level. The biggest reason of the 30 million-ton imported wheat entered into our country in the last 20 years is our need for the qualified wheat. In order to increase quality in the production, TMO also apply chemical analysis besides physical analysis, in other words switch to the pricing according the protein system. This system will direct the industrialist and traders to the qualified product, not the cheap one by bringing standard to the industry and thus encourage the qualified production. The way for the traders to find markets for their products easily is opened by the realization of protein-based industry definitions. The industry that will reach to the product with the desired quality easily with the new purchase system can make the planning in short, medium and long-term easily.
It is inevitable to increase the production amounts and take efficiency-enhancing measures for this in Turkey where population growth rate and per capita grain consumption is high. Likewise, we need to meet the qualified wheat needed by the industry locally by increasing the quality. Therefore improvement of cultivation techniques such as tillage, fertilization, disease and pest control; using qualified seed suitable for the ecological conditions and cultivation technique; directing the producers to make qualified production by reducing the product losses and determining the prices according to the product quality would increase the production amount and quality as Turkey exports flour, pasta, semolina and bulghur in significant amounts. It is important to meet the qualified raw material need with domestic production for the further growth of the industry. As Konya Commodity Exchange, we started the activities of training and consciousness-raising with “Quality in Wheat Breeding Project” for the production of qualified wheat in our region. 4 thousand producers were reached in 17 districts with our faculty members from Selcuk University Faculty of Agriculture and the lecture on the subject was given with the details also in practice where necessary. The interest of our producers on the ongoing project is important in terms of the fact that quality is cared by our farmers as well as our farmers realize that qualified product gains more profits. Our farmers making qualified grains production, industrialists using wheat as raw material, our regional and national economy would gain. Our project that will create awareness of quality in wheat growing will also be a model in switching to the conscious and qualified production as the most important issue in the agriculture according to the European Union regulations. We will continue to our activities on quality with our newly launched project “Project of Increasing the Quality by Protecting the Soil with Track Agriculture” and extend the track agriculture in our region. The visual spots prepared with “Visual Release for Quality in Wheat Project” will be shared with our producers. Our aim is not to pauperize our traders and industrialists to the markets outside of the country and to divert our resources to our own farmers by encouraging qualified production.
Finally, could you tell the importance of agricultural production from your point of view?
Agricultural industry provides great opportunities for Turkey that can reach to 50 countries with 3-hour flight and 2 billion-population with 2-hour flight. As the corridor country in energy, Turkey should also be the corridor country in the international trade of agricultural products. Peaceful and stable world is only possible by ensuring the food safety. As a regional power, Turkey would also be a global power with food safety. Turkey is an important country with its geographical position and agricultural potential. Konya is a significant value in Turkey. This value should be benefitted in the best way. Meeting with water, Konya Plain will be the food base not only of its own region, but also of the close geography.
Turkey can produce averagely 204-dollar product on its one-decare agricultural land. However, Netherland makes 1.000-dollar production on one decare. It adds added value to its production and sells it by using in the agricultural industry. Even, it buys raw material from the foreign markets and also uses it. Thus, the country gains 150 billion-dollar agricultural turnover with 20 billion-dollar agricultural production. However, the share of the further-processed agricultural products is approximately around 10% within the total agricultural export of our country. If the export support is provided for the agricultural industry, Turkey has the potential of obtaining the same export amounts with Netherland especially in the regional market. The support of our country for this would bring price balance to the domestic market. Besides, our current account deficit can be largely met with the production and export subsidies to be given to the agriculture. The cure of the current account deficit is agricultural exports and free agricultural trade.
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