I hope everyone enjoyed the roller coaster ride on the Sesame Street in the past 6 months. Happy to see that most of the predictions in my last report of October have turned out true.
CROP SIZE :-
1:- Everyone expected the number's of 270,000 -280,000 MT to hold true but i think its pretty much clear that India by no means had more than 220,000-230,000 MT at most.
Everyone waited for the Diwali Holidays ( In my last report I did mention that things could change dramatically after Diwali ) to get over and the supply to pick up but in reality it never did and everyone was caught on the wrong foot , including a lot of Indian Exporters. The supply in the markets is still not picking up despite record high prices in Indian rupee terms which can safely be interpreted as " India had a bad crop ".
2:- Globally , It is no secret that china had a small crop as well. Africa was billed to be the saviour for everyone but it turns out they too played the bluff game like India in the past :) The crops in all African origins were just about the same as pervious years and in some areas even lesser so that means the global shortfall created by Indian and Chinese bad crops cannot be fulfilled this year.
NUMBER GAME :-
With such a dynamic broker force in place India has that edge over any other country in getting the latest report just in time before everyone else does. After people realized that India crop was not going to be enough they turned their attention to Africa. India's bought left, right and centre from all African Origins i.e Sudan , Ethiopia , Nigeria , Burkina etc and covered all their open positions. With a substantial price advantage this year a record Import of Sesame Seed happened. If the markets are to be believed India imported about 40,000-50,000 Mt , I would put the number at a 25,000-30,000 Mt mainly because their was a substantial default from African suppliers when the prices suddenly shot up and secondly because yes , Indian's did buy a lot in Africa but not all headed to India, a good chunk was exported as 3rd country trade to China, Vietnam, Turkey etc.
This 25-30,000 MT gave India some breathing space as it covered almost 2 months demand of the hulling factories but since Imported cargo doesn't come with a credit line the money supply slowly but surely dried up. With long transit times ranging from a month to 2 months the everyday local buying slowed down considerably.
African markets slowly caught up with Indian levels, I mean how can you expect them to keep selling cheap , it had to happen sooner or later. The Indian's stopped buying , Chinese went on their new year leave , Turkey was not very active either but still the prices in Africa remained firm and everyone wondered why. I think the obvious answer would be they got carried away and sold too much too quickly and now they dont have a lot of stocks to sell either. We should not forget their next crop comes out in Nov-Dec so thats a good 8 months away.
Ofcourse the big players in Africa have some stocks or atleast they know who has it but i doubt they will panic to sell out anytime soon enough , not until they see the Ramadan demand first which BTW falls early in August this year so the peak demand will be in June/July.
Just for the Numbers official figures as follow
Indian Exports for April to September
2010-11 2011-12 2012-13
April-Sept Export 207,854 180,485 ---
Assuming the Indian Exports would fall by say 30-40% because a lot of clients tell me , ahhh demand is slow , people not using sesame anymore , high prices means low demand etc etc , we would still need about 110-120,000 MT.
Oct-March numbers , for 6 months taking average monthly export to just 25,000 Mt/month , we have already exported , produced and sold about 150,000 MT . Domestically India must have consumed about 15-20,000 MT in the winter months. That is about 170,000 MT .
We started the season with
1:- Carry over stocks of not more than 10,000 Mt
2:- A crop of about 220,000 Mt
3:- Imports of about 30,000 Mt
In Total About 260,000 Mt with an error margin of not more than 10% either side.
That leaves us all with about 90,000-100,000 MT plus the Gujrat Summer crop which is estimated at about 30,000-40,000 Mt , just enough to get through the April-Sept season.
WHAT CAN HAPPEN :-
In the past few months we have noticed that the markets in India have been range bound. Their have been a few big jumps but their was a correction soon after. The main reason i believe for this is the profit booking that happened at every high level. The Import cargo have been coming in slowly and in Dec some people booked orders based on their imported cargo prices and not the levels at which Indian markets were trading.
Then their was the first korean Tender of the season in October , as expected India got all and everyone was bullish. The 2nd Tender came and like i mentioned in my last reports the Africans came out aggressively and Bid a huge share , that suddenly stopped the markets and it has been hovering in the 100-200$ up-down range since then, till the 3rd Tender was announced recently. India got 4200 Mt and Africa 1800 MT . However the 1800 Mt will also be shipped from India so technically all 6000 Mt will move out of India. This however was a profit booking tender as 31st March is Financial Year Ending in India and everyone would love to have good numbers in the balance sheet. The money is clearly short at the moment due to March Year closing but the 6000 Mt export should bring in some liquidity.
In my opinion most of the Imports into India will finish this month so profit booking is almost over. Prices in Africa remain at par with India, new imports will be almost negligible. A lot of profit booking has already been done by the stockiest and i doubt they are afraid anymore of a price fall. With money shortage the stock sizes have reduced drastically which means the cargo is now spread into 100's of small farmers, traders etc making it that much more difficult to bargain.
My opinion is that if the buyer's are still short which I think they are , and if the demand remains slow and steady their is little reason for the markets to fall. Ofcourse the reasons for price rise look more promising as Ramadan demand is totally open , China is still not fully covered , Japan I am sure is the same .Korea will continue its buying irrespective of the price levels and if the Summer crop fails I cant even imagine what will happen.
I am still bullish. The prices have increased by about 25-30% from the season's low in October which is nothing really that dramatic looking at the global situation. A lot of people tell me demand will shrink , somehow I never believed that demand shrinks , it just moves from one place/person to another. Its unbelievable the growth story in Middle east , just like in china the sesame oil demand suddenly picked up I am sure the same will happen with the middle east in terms of Tahina/Halva/Hummus/Bakery consumption and demand in years to come.
If the demand/consumption does really shrink , I am sure the supply will not increase either , so sesame business should get more & more concentrated in the coming years with lots and lots of money involved and added risk of volatility.
When someone says sesame is not attractive to them anymore please don't forget that their is always someone ready to take your place , The only way to win is by staying in the game , it will be a tough game ahead but as they say " No Pain , No Gain" .