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Monday, June 11, 2007

Korean Tender , 11th June 2007

The Korean Tender announced earlier this month for 4000 Mt was declared today and India was awared all 4000 Mt . We did mention this in our
last Market Report dated June 4th.
QUOTE"If we go by previous trends and current price situation in Africa , India should once again be optimistic in getting a substantial quantity."
1000 Mt @ $1019 ( India)
500 Mt @ $1005 "
500 Mt @ $ 998 "
1000 Mt @ $ 996 "
1000 Mt @ $ 993 "
4000 Mt Total
Prices have been understandably lower compared to the last Tender of April due to slow demand but still in the same vicinity of March Tender levels , taking into account the rising Rupee. The levels of $ 1000 is still maintained and African and Pakistan prices are still hovering around $50-$60 above Indian prices so at root levels
prices are still holding a resistance mostly due to very limited stocks.
The USD continues to be weak globally and if experts are to be believed the Rupee is likely to strengthen further in the coming months.
Just a breif on the Indian Monsoon situation , the Rains have been confirmed delayed by atleast 1 week in main Sesame cultivation regions of Gujrat, MP , U.P
and Rajasthan. However a further delay of 10-12 days is likely if the rains do not reach Gujarat by end of this week. India for the first time in last 20 yrs is experiencing
very very hot summers with temp rising upto 46 Degree Centigrades in North and Central India.
News from China is that there are heavy rains in certain regions and no rains in some so their sowing has not commenced as well and the crop there as well may be
delayed by a few weeks. It is yet too early to comment weather there is any crop damage or not.

Monday, June 4, 2007


The much awaited Korean Tender has finally been declared for 4000 Mt and will open on 11th June. Since the last Tender which was announced on April 17th the markets have been very quite. If we go by previous trends and current price situation in Africa , India should once again be optimistic in getting a substantial quantity.
Monsoon as per govt data has touched Indian coasts on time so if all is well we may have rains in Maharastra and Gujarat by Mid of this month and in M .P and U.P by End of June/Early July. The sowing usually commences after the first rains, so with everything going as per schedule we should have new crop in the markets by End September/Early October ( Sesame is a 90 Days crop). This means that the new crop shipments would resume around Mid Oct and reach respective destinations by Early/Mid November. This gives India a good 150 days or 5 more months to work with old crop.
Markets in India have been surprisingly very quite , April/May are traditionally slow months with sluggish demand and this year is no different. The high and unstable prices has also resulted in less aggressive buying from all sectors. The port data however puts in a different picture , we compared the cumulative export data from all the ports and noticed that the actual shipments have fluctuated by merely 8-10% in the last 8 months ( Oct 06 - May 07) , which meansthat most buyers did buy/cover themselves for long term shipments in the earlier months when the prices were not at its peak.
We had pointed this our in our last report as one of the factor for price rise where a bulk of forward contracts were done in the markets in the months of Feb/March.
This also explains why the demand has been sluggish in the last 2 months,a lot of low prices cargo was being shipped which kept the prices at destination under check and the overseas local market did not move in tandem with Indian local prices.
Prices in the last 2 months have more or less moved sideways clearly reconfirming that the stocks are not big enough to create a widespread panic and the stockiest still believe that the demand would resume anytime soon. Current prices may seem high as compared to the season start but that is more due to the Rupee strengthening against the USD. The rupee has appreciated by about 11 % since the start of the season.
For example if we say someone has raw material stocks at oct levels he would have to add 10 % for 8 months as interest ( @ 15% Annually which is basic in India for private lending ) also added to this the warehousing,handling,weight reductions( due to moisture loss) say roughly 1.5% Per Month or 12% . Over and above this we have 11% appreciation of the USD so that makes it a total of 10% + 12% +11 % = 33%.
Taking all these factors into consideration we can understand why the market has shown resilience and not fallen much despite slow demand. At current prices the stockiest are barely cutting even on their stocks and hence are very apprehensive selling their stocks at any lower prices. The markets as be believe has now bottomed out and any further fall would probably end in stockiest holding back and not offering atall.
At the moment about 70% of all Hulling factories have taken a shut down and would resume only on new crop arrival now. Usually factories do not take a shut down if they have stocks left , the operational factories are also running mostly on end to end basis covering their sales and not holding excess merchandise. With atleast 4 more months before the new crop hits the market it would be interesting to see the situation then, as every factory would be eager to cover new crop as soon as possible and resume production. Even if there is slow demand now the stockiest know that the buyers will be without stocks by October and also cover aggressively when the season resumes.
The Ramadan demand as expected has not picked up yet but hopefully will happen by this month end.We have not yet heard or seen of any big stocks in the market and most smaller regional suppliers have almost Zero leftovers.We may have 1 or 2 more Korean tenders before October.
Interesting to see now is that weather the demand stays sluggish for the next 150 days or will the markets finally accept the fact that there is little to loose on current levels and resume buying.
We will keep you posted on the Korean Tender once it is announced.