Good Day Everyone,
The sesame season in India after a dull start finally got all exciting. Cheers to the bulls who've patiently waited for almost 2 seasons for something to happen. The Bears nevertheless are not ready to give up so easily either.
The crop size as per crop survey done by our council was around 330,000 Mt for the 4 Major producing states of U.P , M.P , Rajasthan and Gujrat. Like I said in the previous report this was a safe number but we will have to see if the safe numbers really stand ground this time.The quantities were more or less evenly distributed between the 4 states , however the survey suggested that M.P has the biggest crop which is again debatable.
Arrival Trends since 1st October, 2017
The first arrivals started a week before but we can discount those at the quantities was barely 100-200 bags put together,which is roughly 10-15 MT.The bigger quantities started from Oct 1st, there was a 5-7 days break in between due to Diwali holidays and of course each of the Market Yard follows a 6 day week.
So from the last 60 days , let us discount 8-10 Festive Holidays and 8 Weekly holidays, so total number of working days is 45.
Uttar Pradesh (U.P) Arrivals :- The peak arrivals in the state of U.P have been about 15-16,000 Bags(80 Kg Each) , the minimum so far have been about 5-6000 Bags. Most days it varied between these 2 numbers so a safe average should be about 10,000 Bags.
(10000 Bags X 45 Days X 80 Kg )/ 1000 = 36-38,000 MT
Madhya Pradesh(M.P) Arrivals :- The numbers should be around the same but the arrivals started a little late and the quantities were higher in the start so factoring that we would assume the total arrivals so far have been about 35-40,000 MT.
Rajasthan Arrivals :- The arrivals started only around end October and the numbers do not suggest a number more that 7-8000 Bags in average so i would say the arrivals so far must have been around 25-30,000 MT.
Gujrat Arrivals :- Gujrat arrivals are a mix of locally produced cargo plus a lot of cargo which comes for resale from Rajasthan and MP/UP , then there is a lot of Black Sesame and a lot of Super White Natural which is almost 100% bought for local consumption and some old crop as well . Not factoring all that I would say the arrivals so far must have been in the range of 25-30,000 MT.
So Total arrivals so far( Rounded off) should be 40,000 + 40,000 + 30,000 + 30,000 = 140,000 MT
I could be wrong state wise but I am sure the overall numbers would add up close. Predicting a crop size can have a higher degree of variations but arrivals numbers should not have a variation of 10% at best , so for the Bears lets say the number is 150,000 MT and for the Bulls will keep this number.
If someone has the exact numbers i would love to have them , you can mail or WhatsApp me.
Where did all the Sesame Go ?
Average Indian export is about 25,000 MT Per Month which during peak demand months of Oct/Nov/Dec is about 30,000 MT per Month.
There was a sudden Chinese demand for Oct/Nov shipments which cleaned up a lot of old stocks and of course the new crop. Taking an average 2 week period for preparing and shipment of cargo for export we could safely conclude that a minimum of 60,000 MT has been Exported and another 10-15,000 is ready for export in December.
This should include the 2100 MT Korean Tender which needs to sail our ASAP.
As the buyers do book forward I am sure that whatever is sold for Dec is well covered. The cargo although sitting in the factories and warehouses is already sold and accounted for which means it will not make any impact in the market. Agreed that a lot of forward sales was hedged through Import cargo but that is unlikely to come into India before Jan so its safe to assume that Dec shipments at least are all locally covered , the Imports would be extra Incoming or Future Sale Based.
At a bare minimum anyone who is dealing in Sesame this season if he was remotely bullish would have bought little for stocking which even by conservative numbers should be 15-20% of the arrivals.
So adding up:-
a:- Oct-Nov-Dec :- Exported/Sold/Prepared/ToShip cargo almost 80-90,000 MT
b:- 15-20% Stocking must have happened at Yard levels i.e about 25-30,000 MT
c:- The domestic consumption from Nov-Dec-Jan should be about 30-40,000 MT
The domestic consumption would also most likely clean up the old stocks as well since there already is a sizable price differential between the two for quality reasons.
So adding the above we see that almost everything that has come in the new crop + Carry over stocks is accounted for.
Many would argue my numbers for Domestic consumption but it really is hard to judge the domestic markets size as things moves locally and in smaller quantities so we need to focus only on what the Domestic Market bought from the actual Arrivals at the Yard.
The African Story so far :-
The Sudan crop which was expected to be bigger is now looking smaller than last year. The big crop news forced everyone to clear their warehouses and the carry over stocks in Sudan were at bare minimum . Then there is their currency problem which makes the market very unpredictable. A short Sudan crop might mean nothing to the first world markets but in the Middle east markets and lately China it could create some anxiety.
The Nigerian crop although looking good has its own share of problems. The port congesting in Nigeria has created havoc with the shipments, delays to China means they are forced to look for alternate markets for supply which meant sudden quantum jumps, that may eventually cool down when normalcy resumes with the shipments but i fear it may have already done the damage.
Ethiopia is expected to have a good harvest , however with contradicting news about the crop being 10-15% less to same as before from different people , the benchmark ECX is trading at levels higher than before so I would assume either the Demand is high or the Supply is short.
Tanzania/Mozambique had a disaster crop this year and that means their supply to China from Aug onwards was not so heavy as it used to be which is clearly showing in the low stocks are Chinese ports. The Port stocks in China were below 50,000 MT Levels till recently. People argue a lot of cargo is on its way , but doesn't that also mean that a lot of cargo at destination is already out.
With little competition left to price match them the African suppliers will surely look to get the best value for their product and not offer as cheap as we think they will. Some argue that Africa jumps because India goes up and vice versa , once again its a sweet little bubble we Indians like to live in. Africa now has the quantities , they have big giant Multinational companies and a huge single Market like China and here we assume that we can manipulate all that overnight.
Well to each his own , Would be interesting to see how Africa play their cards this year , will they crumble under the pressure of Quantity business or will they realize that there simply is no volume competition globally anyways.
Korean Tender :-
The Koreans floated a tender for 3900 MT few days ago which needed to be shipped ASAP , however at the first bidding the total quantities Bid from India were exactly 3900 MT , usually they are 2-3 times higher, in layman terms not many sellers interested. Ofocurse prompt shipment was one of the deterrent but there are surely enough Daredevils in India who would have loved to try their luck or do some profit booking if the opportunity was there. Anyways the bids were too high for the Koreans and they decided that the highest they could take was @ USD 1600 so very smartly bids of USD 1599 were accepted. However interestingly they managed to get only 2400 MT , I don't recollect the last time a buyer like Korea did not get the quantities it needed.
From Jan 2018 till the next crop even by conservative numbers the Korean Tenders would need about 50,000 MT of cargo.
Indian Domestic Demand :-
We've had this factor every year in Indian winters and it does make a grand entry trust me you. Last year in November my Prime Minister Mr Modi took a very bold and unexpected step of Demonetization which for atleast a few months created a severe cash crunch , the domestic market focussed on essentials and somewhere in all that frenzy the local consumption suffered. However things are back on track and the domestic demand is booming once again. I think everyone this year almost forgot to factor this major demand in Indian price scenario.
The Road Ahead :-
In a bullish trend a lot of cargo will go into stocks in anticipation of un realistic levels and will not come out in a rush so that stocking that has already happened plus the assumed FARMER hiding 40-45% of the crop should be in no rush to sell either. I really don't see where the pressure trigger would be for a huge slide back in near future.
So from Jan-September technically we should have about 120-150,000 MT Arrivals (Assumed Hidden by the FARMER) +Imports + Summer crop whatever numbers they may be till 2018 Crop.
In previous years I always said that there is enough in the market to last us the full season but this years numbers really don't seem to add up. Previous years small crop was compensated by the year before's huge carry overs but this time we do not have that luxury and cushion to fall back on.
Another interesting angle is , Since India recently banned Import of a some Pulses , a big chunk of those were being produced in Africa , the big guns there have huge investments and with Pulses out of equation they might be shifting their focus on Sesame since its a fast moving and relatively pricy commodity. Logically thinking its quite a possible scenario.
Indian Hulling Industry in the last decade got sucked into the trap of Volume Trade.
Hulled Sesame Seed ,a product where the price of Raw material is almost 90% of the cost ,to play volume game was simply illogical. Apart from the Salaries and odd overheads there wasn't much to gain or loose. With Volume game came speculations and higher risks for little returns.
I think the lower available quantities to the Hulling factories will make them realize their old basics again, to concentrate on efficiency and healthy margins rather than speculations and wafer thin margins.
Our Sesame Industry in India have worked really hard on Food Safety and Quality standards and its high time we start using our Experience ,Expertise and Performance to win back our market share rather than striving to be the cheapest.
What changed since September 2017 so far :-
For a bullish market the bulls really need to get all their fundamental's right
1:- Low Carry over's CHECK
2:- Less new crop CHECK
3:- A steady and healthy export demand CHECK
4:- A steady and healthy domestic demand CHECK
5:- Funds to hold onto stocks for longer CHECK
6:- Low global availability of the cargo CHECK
While for the bearish market the Bears only need to get one of the above 6 right and the market either falls or stays put.
The bears will occasionally keep getting one of the above 6 triggers right and markets will either correct or move sideways but to make it back into a Bear season they need to get atleast 3 triggers right at the same time for a long period of time , its for everyone to make his own assumption now.