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Thursday, December 20, 2007

Korean Tender 20th December

The Korean Tender for the month of December was officially announced today.
Surprisingly India received all 3500 MT . The price range was as below
500 MT @ USD 1441
500 MT @ USD 1469
500 MT @ USD 1469
1500 MT @ USD 1475
500 MT @ USD 1275 , 90/10 Quality.
Once again the surprising factor remains the absence of aggressive African Bid ,Pakistan as we had discussed
previously seems to be out of action this year.As we mentioned in our past reports the African's we believe are
more content feeding the Chinese demand and are still not eager sellers at lower prices.
The price at which this Tender was taken by India also does not reflect the existing market situation here,
It seems like this tender is more of a average price which the bidding companies have managed to make over the
last 2 months and a effort to test the market sentiments .
The African prices evidently are still much higher and despite the fact that compared to last tender the prices are up
by about $350 already it still leaves a little more to achieve for the next one. The next Tender is rumored to be in
Early Jan for about 6000 Mt.
Market sentiments remain bullish in India on long term , once again periodic corrections cannot be ruled out.
Market was very quite for the past 10 days and despite that we did not witness any big fall , it just moved
sideways most of the time with occasional ups and down depending upon demand justifying the fact that
the market base is strong this year.The scary part remains that despite almost 80 days since new crop
arrivals started not once did we see the markets slide in the natural course due to heavy or excess arrivals.
The small corrections that we did notice were more because of market sentiments from time to time.
Whenever the prices dropped the arrivals went down in correlation as the farmers seem to be very well
connected with day to day movements in the market now.
Arrivals have been very steady for the last 2 months and in the last 2 weeks have started to go down as well ,
which is ofcourse the normal trend every year, arrivals will carry on till Jan after which the game shifts to the stocks.
Prices have shot up by almost 40-45% and we doubt that the crop is being held back at farm levels. A lot of
profit booking has already happened on the stocks as well and now the existing stocks are most probably
of the Mid level range.The stocks this year seem to be in the hands of Big players with good holding
power and with 10 months to go before the next arrivals we don't see them panicking anytime soon,
specially when they have already taken part of their profits home.
We must also take the fact into consideration that this year almost everyone sooner or later did cover all their sales
in advance creating a cash flow problem so not much buying is happening at the moment locally and not much business
has been done for long term so that buying is yet to come in later around Jan End/Feb once the old orders finish.
We must also acknowledge that fact that as on date the suppliers and Stockiest from India still have a average to play with ,
whereas the Africans started their crop with Zero carry over and at very high levels , that means their stocking
is also being done at much higher levels.Indian prices will fall only if African prices go down but if African prices
go down that would mean that 100 % of the stockiest and sellers there would be making a loss. What are the
chances that Africa suddenly drops their prices by few hundred $'s just to sell and make a huge loss
rather than wait for a few months for the demand to pick up during Ramadan or wait for Chinese demand to
resume later in the season ,specially when they know their crop and the global crop is weaker compared to last year.
We look forward to your comments and queries and hope to continue serving you trustfully as always.
We wish everyone a A MERRY XMAS and a VERY HAPPY NEW YEAR.

Tuesday, December 4, 2007


We are sure by now everyone is already aware of the drastic changes that have happened since our last market reports.This time however it is global and not just confined to India and hence probably here to stay for long term.Thankfully there were no new Korean Tenders or else it wouldhave been even worse we believe.However there is some unconfirmed news in the market that we may have a Tender very soon this month.
As we have been pointing out ever since July this time that China factor despite what many people thought otherwise was very crucial.The fact remains that their crop was a disaster and they need Sesame Seed for consumption at all costs , if they get it cheap its fine but even at high prices they shall remain in the market.
In our last report we mentioned that the arrivals did not pick up since the new crop came out and we expected them to rise after Diwali which surprisingly they did not as well. The covering pressure which took the prices up early on in the season soon became a buying one. There have been several crop estimate revisions since the sowing this year , from Double to 1.5 times to same but looking at the arrival situation in the last 60 days since new crop started we believe the latest is as below.


Initial estimates

In mt

First revision in mt

Second revision in mt





















As we all know the arrivals from farm levels go on for about 3 months , so taking that into consideration we can safely say about 60% is already out which leaves very little to count on in the coming month.From the initial a huge huge quantitywas sold to China , ofcourse not all will touch their shores as we have already heard about a lot of defaults happening , but never the less the quantum remains big.What has also happened this year was that most stockiest did not get a chance at lower levels to cover as from Day 1 we were talking about a good crop and the buyers kept feeding everyone here about the possible decline once Africa enters the market , this hesitancy did not allow a lot of stocking and the little that happened was sold with the recent high levels, from what we know through our suppliers is that stocking this year is almost 50% of what it was last year and this could be a real tricky situation later on in the year.Moreover the major stocks this year are in the hands of Big boys and strong stockiest who will not panic to sell very easily.
Another 10-15% rise cannot be ruled out not just because of the global reasons but also as traditionally prices do go up about 15-18% from season start prices by Aug-Sep anyways with the interest and warehousing expenses on the stocks. The prices may seem very high this year but if you compare with last year prices they have actually just above the last years highest levels by 4-5% in Local Rupee terms, it just so happens to be a few months quicker that's it, in US$ terms ofcourse it seems like 15-20% higher.The domestic demand in india has not yet picked up fully and likely to pick up pace soon as well , this demand is usually of the Hulled grade so we may see some pressure in that sector soon.
Africa was and still remains the only factor which could have and can stop this emphatic price rise , but as we mentioned early on with global markets the new travels fast and they knowing that their last crop last them barely 10 months in normal buying condition , this year with increased demand and reduced crop they shall literally have no selling pressure at all and the chances of a major correction for long term seems highly unlikely.Their prices as you will notice are very smartly valued at 7-8% above India,giving them a good market share of the Chinese demand with not much problem.We think this should remain the trend for the coming months as well.
The advantage of selling east is also much bigger than selling to Europe or the USA. The financial rotation is faster because of the low transit time and better payment conditions and also much lesser hassles in terms Quality requirement.This is prompting a lot of traders and Exporters to sell very competitively and with huge volumes there ,creating extra pressure in the market.
We all know that the Central American crop is no good this time , Mexico and Guatemala are priced very high due to their crop damage and that can complex the situation further. Moreover most buyers did not have much old crop carry over as everyone expected prices to fall at the start of the new season , when prices opened at similar levels they waited for the correction which unfortunately never came.We believe that the stocks in Europe , US and other major countries is not enough for them to refrain them from re-entering the markets at some point soon.We understand that these high levels will take time to get accepted with the End users but with global food prices of nearly all commodities shooting up it shall be accepted sooner or later.Sometimes its not the question of price
but of requirement , ofcourse their will be a demand crop but that will inconsequential in comparison to the global shortfall.
Later in the season there is Ramadan early into the Year and the Chinese Olympics , going by past experience these
events do bring in optimistic and concentrated demand in the market as well and with no other origins coming out with new crops at that particular period we could see some eager buying.
Once again the rise and fall's will be in Quantums as we have been saying before.Corrections cannot be ruled out and they probably will happen many times , its upto the buyers to judge what the right levels are for them to enter the market and for a change have belief in their suppliers to judge the market and make their buying decision. More and more interaction with your suppliers will only help getting the right price and right quantity at the right time.Few decisions may go wrong but if you look at the long term picture it will only be benifitial.
If you remember what we said in our July report
QUOTE" 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.You may get the price from time to time but not the desired quantity."UNQUOTE