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Monday, May 19, 2008


As you must already be knowing that the last Korean Tender of 5500 Mt was awarded to India. Once again it was at a discounted price in the range 2025-2060 PMT , however the USD has suddenly appreciated by about 3% here in India and that means technically speaking the levels are about $2100.

As expected that most bidder's for this tender were clearing out stocks so not much buying pressure has been witnessed in the market after that. However what it has done is cleared off all the "Pressure" stocks from the market. The last few months have been very quite , prices despite very low demand has managed to sustain bottom line levels and as everyone thought that there is large scale stocking at farmer or stockiest level , none of that has turned out true. The main fear that the exporters had was the Ban on exports and since most of our exporting community have
forward contract's of 1-2 months in average it looked like a very huge stock at that moment. Thankfully the Govt of India did not ban the exports and most stocks were cleared off ,although it took many drastic steps to control the prices by reducing import duties to Zero and implementing stock limits for traders,manufacturer's and exporters despite that we did not see a free fall in prices clearly indicating that stocks are indeed limited.

We are now in a situation where any return on demand is most likely to push the markets back up.Almost 70% of smaller Hulling factories have finished their stocks and have taken a pre-mature shutdown and will now resume only with the new crop. Few that are operating will continue to run at back to back contract and will not go long anymore this season. The Gujarat
summer crop that was eagerly awaited has finally arrived , we had various assumptions from people who indicated the crop to be as big as 30-40,000 Mt and as low as 20,000 Mt .In the one week of arrivals the average arrival in Gujarat is 500 Bags/Day. Even if we assume the crop to be 20,000 Mt , it roughly means about 250,000 Bags (80 Kg each) .If we do the math's that means to touch that volume we need to have an average of 10,000 bags per day for the next one month.
Our data tells us that its highly unlikely as even the main crop did not touch those levels this year.Also it is unlikely that the farmers are holding back crop as the levels are still very high and they are making more than double of last yr levels.

Sowing will commence is Early/Mid July and the new crop if all goes well arrives in Sept End/Early October.Everyone here talks of a big crop this time as the prices were high , but the fact is with all commodities gone up the farmers have so many to choose from and its too early to predict anything.However the farmers will be back to purchase farm seeds in June and our assumption is that they would need about 3-4000 Mt from the market(1% of total output) for resowing and that should clean up the market even further.

It is understandable that with high prices the demand has gone down but it still looks unlikely that the buyer's have enough to last them for next 5 months when the new crop arrives.China has been very quite and consuming its own stocks.Africa has been steady all this while but with low demand we have seen some panic selling lately.Lot of defaults heard of in Turkish market after they booked at high levels and the prices came down.The same for other markets as well. It is rather surprising as there were very little defaults from India this year despite the high levels.

We still believe that the demand will resume and we will see some prices corrections as that and the Govt of India are the only 2 factors holding the prices down .Central America and other destinations continue to trade sideways and the same with Indian prices if you leave out the discounted prices being offered by traders and exporters who are exiting the market for this season at the moment.

As we all know that there have been 2 major incidence in Myanmar and China this month where reportedly over 100,000 people have been killed and millions have been affected. We hope and pray that god gives peace to the souls of the departed and strength and courage to the one's who survived this cruel act of mother nature.