I am sure last few days have been busy for everyone. Everyone was waiting to get some numbers on the new season and last week our association IOPEPC finally came out with some.
It was great to know that the market report was being circulated in real time by some of our friends. I actually got an SMS IN the conference hall with the same crop numbers on the screen even before the presentation was over , it was hilarious :) but that's India for everyone.
Now to some interesting facts and numbers , which most of you probably are already familiar with.
NEW CROP SCENARIO :-
1:- Total Crop Predicted in the range of 270,000 MT -280,000 MT. Since this year the crop survey was done by an outside agency and not by the people of the trade i would take this number to be more or less accurate with 10% margin on either side.
I really hope the error is on the higher side because a crop less than 250,000 would be a real bad situation for the trade.
2:- UP/MP is about 150,000 MT put in total so thats where most of the cargo will come from as always. Rajasthan about 80,000 Mt and Gujarat about 25-30,000 Mt at Max . Since most of the Rajasthan/Gujarat crop will anyways go for Natural 99/1,98/2 grade , everyone can safely save on the "Gujarat Origin Hulled" premium till summer crop next year , because I don't think after taking out the natural grades and stockist share there is much available for hulling.
3:- Globally , China is short and thats a confirmation as well , though various trade organization and sources. The shortfall compared to last year is about 100,000 Mt , which is just about the same as India.
So overall the world shortage about 200,000MT which need to be filled, from where and hows lets see.
3:- African all origins are doing well this year. All the crops that have come out till now have been good and almost same as their previous years.However the 2 biggest crops from Africa i.e Ethiopia and Sudan are yet to be harvested and if reports are to be believed the sowing and weather have all been good. If anyone can fill the 200,000 Mt global gap its these 2 countries.
4:- The carry over stocks worldwide in all producing and consuming countries have been less than previous years as well , that again is a confirmation and no rumor or else we would not be in a situation as we are today.
NUMBER GAME :-
India crop as I reported in my last report is late . Almost all the reasons we predicted were indeed spot on for the small crop this year round.
I know some would say last year as well we had predicted a small crop ( SEPT 15th 2011) report and stated bullishness and were wrong. I agree. We did go wrong on the preditions but like i always say , I just compile what i hear from sources and yes we were wrong on the Number but not on the bullishness factor. Markets did remain bullish all throughout , its just that the customers did not feel the pinch because the USD from Rs.44 in Aug 11 moved to Rs. 57 in Aug 2012. This year however i think chances of a reversal are more than further weakness. Its already down to Rs 53 from Rs 57 highs.
Looking at some numbers :-
In the past 2 years the India exports have been
2010-11 2011-12 2012-13
Sesame Export 398,000 399,000 ---
Ofcourse the Export numbers include the Brown and Crushing grade Sesame as well which comes from other states than the above mentioned 5 and the summer crop production , but this also includes the Hulled Sesame and Cleaned Sesame Numbers which means a lot more quantity in terms of farm level. Not to forget the Domestic demand also came out from these production numbers .
So what does these numbers suggest? I would say 2 things
a:- If the global demand remains the same , India is short on supply this year for sure.
b:- Carry over stocks have mostly been consumed over the past few years due to mismatch production and Export numbers.
WHAT CAN ALSO HAPPEN :-
There have been some news of late sowing in the market. The current trend is to underplay that news because no one wants to be out of the pack trying to justify that there could be a bearish factor as well in the near future. I am not sure how big or small that late sowing crop could be but if a significant number comes out in late november it could stall if not derail the bullish trend for a while.
Africa comes out in December and that can be a game changer. With the excess stocks they have in hand they can really go full throttle on the sales and come out with aggressive prices and take away the advantage from India. It could lead to be a cat and mouse game after that. India will drop its prices to recapture the market, Africa with its bumper crop will drop further and we see a crash as we have seen many a times in India. But there is a big IF in this situation , IF africa comes out with the numbers projected so far because the carryover in Africa are not significant either so this game cannot be played with cards in hand , it will all depend on the cards that are dealt to us in December.
The demand can and probably will shrink a bit as well as we have seen in the past with higher levels. At high levels the risk capacity reduces significantly and people tend to start focussing on other money making avenues to cut their risk. The consumption slows down and people tend to stock very little or prefer back to back trade which in turn makes the market nervous and keep the price movements limited.
Koreans have been a significant market movers in the past few years and any infiltration on this front by african players can set the cat amongst the pigeon and pull down the market, India will have to be competitive enough to grab the korean market share again. We shall know that in a few days time as a 6000 MT Korean is scheduled for 24th October. Maybe the africans will not be aggressive in this one but the price acceptance should prepare the african contingent for the next battle.
WHAT HAS CHANGED :-
A lot of people when talking of sesame this year start the comparison with the 2007-2008 yr where the markets went crazy and beyond anyone's wild imagination. There are also comparisons with what happened in GUAR GUM with their unbelievable growth in the past few years.
However there are a few changes i believe since then that we should keep in mind
1:- In 2007 , China was short and Africa was short . India was the only supplier so technically what happened in India that year should happen in Africa this year. With no cargo or with most swept and locked warehouse what are you left with to sell. When we dont have anything to sell the price could be anything but you are not making money , right.
2:- In 2007 China had recently become a next importer , till 2001-2 it was also an exporter with a huge crop. Their crop was going down slowly , their domestic demand was picking up and they started cutting down on export when 2007 happened and suddenly they had a very short crop and they were caught offguard. At that point they primarily preferred india to cater to their imports and that led to a very bullish buying from India.
Now ofcourse the situation is entirely different , they import most of their requirements from Africa and will look first towards Africa to fill in their crop deficit. The Border trade with India should continue as well. This time their import numbers suggest that they were well prepared for a short crop and hence started to clean up the African stocks much in advance. However their stocks are still at lower levels and they will have to buy soon.
3:- The $ was not as much volatile back then at is now , with 1% +/- movements on a daily basis and 10% or more movement over a full year horizon.
4:- The demand has certainly grown as well in the past 5 years where as the crops have not grown in tandem.
We are BULLISH. No doubt about that. I think if someone manages to catch the bottom levels there are good chances they will make money on a long term basis this year. YES , there will be up's and down's. There will be times of low demand , there will be times of global competitiveness but on a long terms basis , on a 12 month scenario till next crop we are definitely bullish.
The new crop as predicted is late and not even fully out in the market but we saw some upwards movement already. I think it was more of a panic situation after hearing the numbers. I do expect some corrections in the coming weeks as farmers/stockist will first test the waters by letting out the first arrivals before holding back and that is when the game really starts. However mistakes and misses are most likely to happen in the falling market so everyone really needs to be on their toes for the next few weeks. Things could change drastically after Diwali.
That said , If things turn out to be the way they are expected , my previous JULY 19th report about benchmark reset should stand correct and Sesame for the near future will not be a sub 2000$(Hulled) commodity anymore.
People have been talking about 100-150% growth in price , I once again wish i knew the limits but in a bullish year and the current volatile global market situation it should not be wrong to wish for atleast 50% price growth. Im sure everyone can do the maths on this.
Once again our suggestion would be to be in the market all the time rather than waiting for the bottom levels. A good average is more likely to ease off the pressure than having sleepless nights to catch the bottom the next morning.
Like always would be nice to have your suggestions and comments. We can connect on Skype :- mukulgupta78 or you can mail me anytime on firstname.lastname@example.org.