1:- Markets remained stableand were range bound in $1550-$1650 FOB for Hulled Sesame for most past of this season. We had a big summer crop in Gujrat but even that did not get the markets to crash so we figured there was a bottom being formed there.
2:- Stockist held onto their high priced stocks and decided they will take a chance with the next crop rather than offloading the cargo at lower levels in May/June and the supplies became limited and the prices stable.
3:- News of Korean Tender does create ripples everytime it is announced and did the same in early July as well , however the situation compounded with sudden renewed demand from China and Turkey and news that the Chinese crop was damaged . The figures of damage range from 50% to 20% so our fair estimate is that the damage is somewhere between 20-30%.
4:- The monsoons in India got delayed and some sesame growing area’s got very heavy rainfall and there could be a crop shift there , while in states like Gujarat and Rajasthan there is bound to be a crop shift to Cotton and Groundnut by the farmers as those crops are yielding better returns for them.
5:- Some African crops have been damaged as well and there is not much carry over stock in Africa too and with the Ramadan demand next month those stocks are likely to be further depleted. Prices have already jumped significantly there and are unlikely to drop as fast as they do in India.
6:- Last 3 weeks have seen a price jump of almost 15% and that has given the stockiest hope and strength once more to hold on and it is highly unlikely they will sell in panic anytime soon , Yes in some cases where the stocks changed hands , the new high price owner might panic and sell but those may not be too many in numbers and volume.
7:- Atleast one Korean Tender will most likely be announced before the new crop and that means a good 7-8000 MT has to be shipped out from current stocks.
8:- New crop is unlikely to come out in full swing before Mid Oct and by then the China story will be very clear and if the rumours hold true im afraid we could end up seeing a situation like 2007 all over again.
9:- Indian crop size in most probability will not be any bigger in size than previous years and some buyer’s fail to notice that despite low demand from china and turkey that crop size hasbarely been enough to last a full year unless we have a bumper summer crop . We’ve not had any big carry over’s despite the fall in export volumes over the past 2 years and even a 20% fall in Chinese crop means they would need about 100,000 Mt additionally , weather its from India or Africa is another story , which is more than 1/3rd of India’s October Harvest if we assume the crop size will be around 260,000 MT (same as last year).
10:- Our data analysis for the past 10 yrs show that on new crop the prices drop about 10-15% initially over the closing September levels and then move up again ( Drastically in last few yrs and gradually before That) , in either case if we assume that the situation will be same this year the stockists are bound to latch onto the 10-15% decline very very quickly as those levels will seem very attractive compared to the Prices in the last few yrs.
11:- Another reason should be that everyone who is still stuck at high levels stocks would want to average out their purchase by tring to cover more and more at lower levels.
12:- Everyone knows that the stocks at destinations are not too big either as most buyers have been moving back 2 back most of this season , the demand has to return and buyer’s have to buy, when and how much and at what levels they will decide to step in is the question.
13:- Overall our assessment is that we may see some dips from time to time but on lower levels we see a very strong resistance at $1600 FOB levels and on the higher side its anyone’s guess .
14:- The USD is also likely to play a major role as it always has , we saw it go down to Rs 44.50 levels before bouncing back to Rs 47.50 levels again and currently its back to Rs 46.70 levels. Hopefully it will remain high and help the exporters keep the prices competitive.
Its still to early to predict the new crop situation but judging the farmers sentiments and the monsoon position we don’t see the crop size to be bigger than last year in anycase. Our estimates of current stocks in India is about 30-40,000 MT at most and that is spread between so many people its hard to judge how many will hold on and how many will finish their’s before the new crop.
If the news from China and Africa are correct , yes we are bullish for the coming season , if not still I believe the prices might remain range bound between $1600 -$1900 in any case.