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Friday, November 2, 2007

Korean Tender 5000 Mt Oct/Market Report

The Korean tender of 5000 Mt for the Month of October was as expected awarded to India in the price range of USD 1107 - USD 1121.
There was negligible participation from the African Nations as their old stocks are as good as finished , however the big surprise was the
absence of a strong participation we usually see during this particular time from Pakistan.As we had mentioned in our previous report we
had heard about a weak crop in Pakistan , being in almost the same geographical location and having similar harvest cycle as Gujarat we
believed that there would have been similar damages to their crop as well , which seems evident from their lack of interest in Korean Tenders.
The new crop arrivals began earlier in October and picked up in quantum around mid of the month. With the last 2 weeks and the coming week
being Holy months in India, which are specially more avidly followed in U.P/M.P region we believed that the arrivals would pick up sooner or later.
However the patience of buyers and forward sellers ran out a little too early and the market has already seen a rise of about 12% from the lowest levels
where it started from.Buying pressure from day one also did not allow the markets to settle down at lower levels and it more or less picked up from the
last year end prices , whereas usually we have experienced a discount of about 8-10% on old crops closing prices in the past.
China factor despite mixed feeling is very much evident , it is now confirmed news that they do have a bad crop , many of us ofcourse will argue on
the size of reduction. The fact remains that they are consuming more and more every year ,that is the reason from a Exporting nation they have now
almost become a net Importing one, barring their trade with Japan and Korea. At conservative levels their crop damage of 30% amounts to about 200,000 Mt
which will definitely put pressure on global prices. Like we mentioned earlier it doesn't matter where they buy from , be it India , Myanmar or Africa that
quantity WILL TRAVEL East.They have supposedly bought quite a lot of cargo from India at low levels earlier in the season mainly due to the fact that
Africa will not be in the market till Dec End/Early. It's a global market now and news travels fast so if the Indian prices are on a high in Dec we see
no reason why our friends in Africa will panic and sell their merchandise at huge discounts as they would have good 10 more months to hold before any
other new crop arrives and a benchmark price from India to base on .Also this year keeping in mind that they finished their last crop in barely 8 months.
Mixed news about their crop ,but general feeling we've heard is of a good crop similar in size to last year.
We still believe that markets went up too much too quickly, however the arrivals surprisingly are not picking up and their is more of covering pressure
at the moment from the people who sold rather than of business being done at higher levels.Everyone again is waiting for prices to fall and that we have
seen in the past never works out well. As per our feeling market should provide a low level window to buy at low level , which we now think maynot be lower
than the levels the season started on. Moreover in the next 2 weeks the domestic demand picks up which always keeps the prices at check as in past.
We think in short term there is good buying opportunity till Mid Nov and for long term around Mid Jan after the African crop arrives but that ofcourse is subject
to how their crop is.
We have alredy seen Intraday jumps of 30-35$'s in the last week and we think this will be case all year , quantum drops and quantum jumps.
Finally in the last few days there has been Rumors that the Govt of India is likely to impose a Ban on Sesame Seeds, today we have that in Newspapers as well.
When and If that will happen remains a mystery.Technically this news should have taken the prices downwards but infact what seems to be happeing is that the spot buying has picked up in a frenzy as everyone is in a rush to get their cargo moved out in case of eventuality.If the ban happens what will happen?Markets in India will ofcourse crash , the seeds will go into crusing for oil but what good will than do to the buyers when we can't export , with India out ,China short and African crop still 2 months away we wonder what the situation will be like.