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Tuesday, July 30, 2013

Sesame Seed Market Report July 30th 2013

Hello Everyone,

Time again for the sowing season in India and for bulls/bears to come out with their own adventurous stories.

Sesame Market has been lackluster over the past few months with limited demand and slow international movement. The Ramadan demand did not create any ripples in the market as expected and the very strong $ has kept the prices low in international terms despite stable and high prices in local indian currency.

As we all know India imported huge quantities of sesame seed from Africa this year at the start of the season and that helped sustain the demand of factories here for the full season. The domestic crop  is more or less exhausted and with good 2-3 months to go before the real new crop actually arrives in the market I believe we will most likely finish everything even if things move at snail's pace.

1:- Why are the prices falling :-
      Everyone keeps asking the same question now, why are the prices falling when stocks are low ?

The first reason ofcourse if the USD which has fallen over 10% over the past few months , in commodity terms thats like a discount of USD 200-250 /PMT despite prices being same in domestic terms in India.

The second reason is slow buying from customers , I think with high levels very few take risk and have decided to go back to back on their purchase. Like i said before some people indicate that the consumption has dropped , again I never agreed with that fact. It's probably that people have low inventory rather than anything else . The overall numbers however tell a different story.

Export of Sesame Seed from India

                                    April 2012/March 2013                 April2011/March2012
Total (Qty/Mt)            299,517.50                                      389,153.50                      Less 89,636

Major Deviation country wise :-

Taiwan                         14970.00                                        24467.00                   (- 9497 )
China                             2807.00                                        11389.00                    (- 8582 )
Egypt                             8298.00                                        20402.00                     (-12104)
Turkey                         12610.00                                       16223.00                     (-3613)
UAE                              3730.00                                         6391.00                      (-2661)
Vietnam                       45664.00                                        89088.00                     (-43424)

Total                                                                                                                        Less 79,881

So the numbers actually say that 90% of the shortfall is due to 6 countries alone, barring UAE all the other 5 countries mostly buy Natrual so I am assuming their demand shifted to Africa because prices were low there. So i don't really see a pattern of consumption fall , its merely a shift to the cheapest source of supply which is a normal reaction in today's global scenario.

The third factor is ofcourse profit booking. Since the demand was slow and most exporters unwilling to take undue risk there was profit booking at every stage which kept the prices down. Everytime there was a jump there was someone in the market willing to sell at below market price based on his stock value rather than the prevailing prices which continues to confuse and pull the prices down.

Usually in a bear market i would be worried if its a supply based fall...however when the fall is demand based it usually means there are pockets of opportunity for both seller and buyers and the trends are very hard to predict.

Back to the Present :-

So what is actually happening with the new crop now. The views ofcourse differ from person to person. The monsoon has been early this year , but it has also been very strong. The sowing usually starts after we have the first few rain showers and the soil is well irrigated .

Talking to the local's the sowing has started in area's where they got a chance and is good in terms of size so far , some area's ofcourse are still waiting for the rains to stop. I am usually not flattered by the sowing number's because atleast for sesame seed they are irrelevant unless we have the perfect climate during harvest. A few days of rains during harvest can change the number game drastically as we have seen in the past.

Pls find below the rainfall chart for June-July and you will notice that the rains have been far far excess in all major sesame growing area's except for Rajasthan. However its still too early to say if that's good or bad. My gut feeling however say's that since sesame is so sensitive to water and with a good monsoon now confirmed the farmer's would be taking a lot of risk placing their bet's on sesame.

Ofcourse the traditional sesame farmer would continue to do it , but for new acreage to be added its a risk you have to keep in mind.

US$ will continue to remain volatile it seems and its movement can decide what levels we will see in the coming future. Overall I believe with low global stocks another failure or bumper crop in the coming season in India , China or Africa and turn the tide's either ways.