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Tuesday, October 14, 2008

Sesame Seed Market Report 14th October 2008

As most of you must have been already updated by your respective suppliers about the Trade meeting that was held on 11th and 12th Oct in India.

Most of the eminent trade related people attended the conference which included the Exporters, Brokers and Local Suppliers . Everyone put forward their views about the crop size and quality. Our trade association also sent out survey teams to all Sesame producing states to give us all a first hand idea about the situation there.
As per our previous market report we estimated the crop size as follows
Origin Estimates Aug (Mts) Estimates in Sept (Mts)
U.P/MP 110,000 100,000
Rajasthan 110,000 100,000
Gujrat 70,000 70,000
Others 10,000 10,000
300,000 280,000
However at the trade the survey teams findings were as follows
Origin Estimates (Mts)
U.P/MP 85,000
Rajasthan 110,000
Gujrat 60,000
Others 10,000
265,000 Mt

However the traders and brokers from Rajasthan put forward their view that due to some late rains in Rajasthan at the time of harvesting there have been some damages and they estimate the quantity to be around 80,000 MT.Even the estimates in U.P and M.P were argued to be lower but not very significantly.

This gives us a range from 235,00 Mt to 265,000 Mt for the Indian crop.Everyone agrees that China has a better crop than last year and may not necessarily buy from India , unless the prices fall significantly here and even the African Crop looks very promising up and is estimated to be up by about 10% from last year.

All the crop is however delayed by 2-3 weeks in India due to the heavy rains at the time of harvesting and that means the arrival pressure is not building up at any destination.We also believe that although not many people have sold big quantities forward this year as buyers were reluctant to cover as well so early on , we have to take into prospective the collective sale that has happened over the last few weeks in anticipation of price fall by the Indian Exporters.The untimely Korean Tender's , last 2 of which combine to be a quantity of about 10,000 Mt is mostly open contracted and is yet to be covered along with numerous smaller contracts that our export fraternity has also sold without covering.

The arrivals that picked up in Gujarat and Rajasthan have been broadly stagnant and since in India we have Diwali holidays from 22nd Oct to 29th Oct there is a big rush to cover at all levels by exporters who need to fulfill their Oct-Early November shipments. The situation has been worsened by the rain damaged seeds which are estimated to be around 20-25% of the total crop this year.This quantity is totally unsuitable for exports and will get absorbed in the domestic oil crushing market in India.

Everyone at the meet also agreed that the demand will go down significantly this year due to the high prices and global financial turmoil which we believe is true as well.However with Indian export's touching 320,000 Mt figures last year even a drop 30% of global demand (Including Chinese demand which was about 60,000 Mt ) last year we still need to have about 200,000 Mt to export which is again the back to back situation we faced last year.

This should keep the prices firm atleast till African harvest starts in Nov End/December.The prices impact in the last few days may have surprised the buyers as the domestic prices have not really appreciates by that much as the FOB and CNF prices that the buyers may see reflecting on their respective current offers now as compared to 1-2 weeks ago. The problem here is that most sellers were offering prices in anticipation that the prices will fall , many not necessarily speculating but taking a calculated risk by estimating that prices may soften by 2-3 % as the arrivals pick up , however with that scenario gone now they now have to factor in not just the 2-3 % calculated risk but also the 4-5% price rise in the domestic market and the 2-3% fall in the USD. So suddenly the prices are 9-10% expensive although the price rise in Domestic market in India is only 4-5%.

As we assumed in our previous reports the fluctuation again this year should be in quantum's depending more on the USD and the market sentiments rather than actual prices as and when they are at a particular point of time. Also if by any "Bad Luck" the domestic demand of sesame seed in India which is traditionally very strong during the months of Nov end till Mid Jan remains strong as previous years we can easily see a consumption of about 50,000 Mt in the India which can further put pressure in the market.

Despite all the above we do not expect or want the prices to go up , we would rather see prices of sesame at a sustainable level with good volumes rather than very high prices and a major slow down in demand for the coming season as that can hurt any trade in the long term.Other destinations can easily substitute the Indian suppliers as far as Natural sesame is concerned but we still believe that India is still in a very strong position as far as Hulled Sesame seed is concerned. Last year we saw emergence of certain new destination for Hulled but those were mostly because of the crazy price escalation which gave them a window to match or even sell at lower prices than India at certain point of time as they managed to cover the raw material early on low prices.However that may not be the case this year as prices have started on a high and strengthened from those levels without touching the bottom.

This sudden price rise has caught most of the exporters and importers by surprise as everyone expected the prices to fall atleast for a short period which did not happen, everyone hopes here that once the covering buying is over for the Korean tender and short covering we may see prices slide again after Diwali i.e End Oct/Early Nov which should them open a window to cover again.We see another opening around End Jan after the African Crop and slowdown in Indian domestic demand.

Once again we emphasize that it would be very difficult to judge the bottom this year and most trade will have to be done based on a better average.