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Thursday, July 26, 2007

Korean Tender July 23rd.

The Korean tender for 6000 Mt was awarded today and as expected India managed to bag 5000 Mt at a price range of USD 1137-1143 , Pakistan was awarded the other 1000 Mt. Interestingly in contrast to expectations the African prices were seen ruling higher by 40-50$/MT . We believe the reason for the same is a confirmed Chinese crop failure, the total damage due to floods and crop shifting is expected to be in the range of 30-35% and going by previous trends African suppliers know they can always manage to fetch a better price in the Chinese market when their New Year demand starts and are not is a rush to sell at cheap levels as their new crop doesn't arrive until Feb/March 2008.
Indian crop is also not shaping out too well , Gujarat and Maharashtra will be lucky to have 50 % of what they had last year and the northern states of U.P,M.P and Rajasthan even with a big crop may at best substitute the gap , but even that depends on the rains which have dried up for the last 10-12 days and if it doesn't pick up again we may see some damage to the crop in U.P and M.P as well , atleast in terms of yield leading to lower volumes.The delay is inevitable now and we don't see new crop arriving in full swing before 2nd half October now.

Thursday, July 12, 2007


As expected the next Korean Tender for 6000 Mt was declared yesterday and will open on the 20th .Markets have been very volatile since the tender last month and there is no reason to believe that the volatility will not continue further after this one. We might have one last tender before the new crop arrives in September or Early October as well.
Now about the Rains and sowing , the monsoon rains have again been very erratic this year with huge uneven spread of showers.They were first late to reach respective areas and when they did arrive created havoc. Maharastra, Gujarat and southern Rajasthan have been very badly hit with heavy rains,floods and the problem got multiplied with a few big dams which broke and flooded entire villages.The reports that we have from various sources confirm that a very large areas under cultivation in these areas is hit badly. The small 60 days crop which comes out from this region is said to be completely wiped out, this crop although not big in size usually helps easing the buying pressure on the new crop arrivals which most likely will not be the case this year.
Initial estimates say that we could have a crop size of less than 50% in these areas as apart from the rain damage there has been a massive crop shifting towards groundnuts and cotton as evident from the crop size in last couple of years. Madhya Pradesh and Uttar Pradesh are likely to have a good crop, sowing patterns show a rise in area but the yield we believe will continues to remain low as farmers were noticed sowing the same seeds as last year.
However the MP and UP areas are also experiencing erratic rains with no rains for last 8-10 days in certain areas and heavy rainfall in some , at the moment the plants can still survive and resowing can be done if need be but the situation may change if this continues till this month end.
Overall one this is a certainty that new crop will not come out in any region before Mid October and if it does come earlier in smaller batches then that would only lead to panic buying and overall rise in prices by the time bulk quantities arrive.This means the cargo's will not touch respective destination in any case before Mid or end of November , now the question for buyers is "Do they have enough stock to last them till end of November", and even at that moment we are talking small quantities as the shippers will have to service all their clients and not just one.
We also noticed that the overseas markets are quite just because the prices are high , at 100$ cheap im sure anyone can sell any given quantity at the moment so there definitely is a demand undercurrent going on.
About 80% of the factories are shut down at the moment and waiting anxiously to buy raw material and to run their factories, pipe line for the old stock is empty , buyers who waited and waited for prices to fall were caught on the wrong foot and will be eager to buy as well , the domestic demand from India will pick up where one can fetch a high premium compared to export prices without much inspection hassles, stockiest will be lining up to fill their warehouses and the crop is LATE.
Africa will not come out with new crop until Feb-March and confirmed reports from China is that their sowing is down almost 30% again owing to a huge crop shifting to Cotton and Groundnut. We are not trying to scare or create a panic with our reports , if you have read our previous reports you would have noticed that we only try to bring to you the actual mood and sentiments on the Indian market through out wide network of farmers, traders, export fraternity and brokers.
U.P and M.P last year had a big crop but we've all seen that 9 months down the line we are out of stocks, if Gujarat,Maharastra and Rajasthan have smaller volumes then a bigger U.P and M.P crop will at most cover the gap more than anything else. What happens to the Chinese shortfall, the annual growth in demand and increasing pressure from the oil market sector ?
However its too early to assess the size and quantity of the crop , we may get a clearer picture by next month and we shall again send a report for the same,but just in case our above findings are true we suggest that you hold on tight to your respective suppliers as this could be a bumpy year ahead .After years of sorting out of bad suppliers it could be year of sorting out of buyers this year round.As we put in one of our previous reports , you may get the price from time to time but not the desired quantity.