As most people would agree it has indeed been a very strange year for Sesame Seeds.2008 started with extreme bullishness and is strangely ended in the exact opposite note.However the troubled world economy and the weak sentiments has a large contribution to this as well.
Since our last report where we mentioned that there might be resistance at lower levels has proved right.We did touch the season's lowest and have bounced back as well. As we have been pointing since the start of the season the USD is playing a very prominent role this year.In Mid November the Rupee was trading at Rs.48- Rs 48.50 to a USD range , by the end of November/Early Dec it once again peaked to Rs 50.40 levels and continues to remain in the band of Rs 48-48.75 ever since.
From the last Korean Tender India bagged a sizeable quantity despite a huge price differential between the Indian and African prices. This clearly imply that price is not always the factor that determines the buying decisions and India should continue to keep that logistical and delivery advantage in future as well.Although it would be unfair on our part to say this but there is still a lot of insecurity and apprehension among a lot of buyers while buying from Africa due to their past record of defaults and quality.
In terms of Indian prospective even though the quantity was less but it still gave some support to the markets at lower levels and clearly implies the situation here.Although it is absolutely impossible to predict the exact crop quantities in India,Africa and China but since everyone in the trade including farmers, traders and exporters have now come to a conclusion that the total crop in India is at best between 200,000 MT to 210,000 MT.
However this year everyone is talking about Africa more than the Indian price's and rightly so.They have the biggest crop and in eventuality of a demand revival will be the only source which can cater to bulk quantities.The prices started coming out of Africa in November. Nigeria,Ethiopia and Sudan all started to quote really competitive prices and that literally confused the entire sesame trading community including the Indian exporters. At one stage the price difference in India and Africa was almost $400/Mt which prompted some Indian companies to look at the option of Importing the seeds from Africa.This situation however did not persist for long as the strong USD and steady price fall in Indian prices ultimately made the imports un-viable.
However there is confirmed news that India has bought about 5000 MT from Africa most of which was to cover their back to back sales.Turkey and China which last year bought huge quantities from India have done so from Africa this year and that is the reason the African prices have moved in a short band of $50-$100 over the past 3 month.
An interesting situation in India is that the Export is down by almost 50% YoY basis.If the USD and ocean freights were still at last years levels the prices would seem 20-25% i.e well above $2000 FOB PMT for Hulled.Why are the prices not falling then?Lets looks at some statistics here ( These are my assumptions based on conversations with friends in trade)
According to our estimates there are about 10 Big Hulling factories(Direct Exporters and Manufactures) in India having
a daily capacity of about 30 Mt/Day and an equal number of smaller factories which produce about 20 Mt/Day,these include the Sun Dry manufacturers and small manufactures who get cater to the trading community.Then there are about 15-20 factories which are very small and cater primarily to the domestic demand in India and operate for 3-4 months only ( Oct-Jan).
The new crop started to trickle in around the last week of September.That gives us about 120 days since the factories have started and for farm level arrivals in the local factories. My rough estimate would be that the factories operated for about 90 days in the past 4 months. That gives us the following.
Num of Factories X Daily Production X Working days since 1st Oct(New Crop) = Total Production
10 Factories X 30Mt/Day X 90 Production Days= 27,000 Mt ( 95 % Exported)
10 Factories X 20Mt/Day X 90 Production Days= 18,000 Mt ( 50 % Exported)
20 Factories X 10Mt/Day X 90 Production Days= 18,000 Mt (100 % Domestic)
Total = 63,000 Mt
To make 63,000 Mt the factories would have consumed an average 20% more Natural i.e about 75,000 MT.
On conservative estimates I would like to believe that there has been a trade of about 50,000 Mt of Natural as well including the Korean Tender supply, domestic consumption of the White 99/1 Grade and crushing quality seeds for Oil used in domestic market.
This almost tallies with the farm arrival figures in the domestic markets.
Avg Gujrat arrival about 5,000 Bags/Day
Avg Rajasthan arrival 10,000 Bags/Day
Avg U.P/M.P arrival 5000 Bags/Day
All India average arrival (all states and local markets put together ) = 20,000 Bags/Day
20,000 bags X 80 Kg/bag X 90 Days of arrival / 1000 =145,000 Mt Arrivals from farmers till date.
Based on estimates that the total crop is about 200,000 Mt it means we have about 60,000 Mt at max which has to come out from farmers or farm levels stockiest to work with for the next 7 months.
I'll assume that the summer crop which comes out in April/May in Gujrat will be about 20,000 Mt but their sowing will
depend on how the prices of Sesame seed are viz a viz Cotton and Groundnut.I think with groundnut that is relatively less Export dependent should also factor in the farmers choice of sowing.
Just as it is an open secret now that most Importers have long term open contracts and very rightly so since they assume that the markets will slide further but they will surely need to cover those at some point, however I would also like to believe that the stocking in India was relatively lesser than last year for 3 reasons
a:-) Prices did not fall to a certain level as anticipated which held back the stockiest
b:-) Farmers got in the merchandise in smaller lots
c:-) Financial crunch
To everyone's surprise the prices in Africa started going up at the same time when prices were falling in India.Other smaller origins such as Uganda,Senegal, Burkina Faso , Mali and Pakistan all have normal crops and their farmers like everywhere else feel a little cheated and are not ready to sell their cargo at low prices.As a trading community we all should understand that sesame is a low yield crop which fetches the farmer less than $400/Hectare ( Avg 400 Kg yield) in normal circumstances , this year it seems at no destination the farmers are willing to sell their cargo below the $1000/Mt benchmark levels.For them ofcourse this is still almost half of the levels they saw last year but
still a fair price for a commodity like sesame and that is the reason the farmers are reluctant to sell at anything lower.
In India the balance of trade remains very sensitively placed.I know that in the past the trading community has many times claimed that we might run out of crop at some stage which ofcourse never happened.This year too I doubt a situation like that is likely , not because we have enough but because the demand is down. Last year as well India barely had enough to cover the demand and the carry over stocks were limited and those too were left as the prices and demand fell at the end. We have time and again visited the farmers , traders and stockiest. The stocks are very limited and everyone by the end of Jan will probably get into a hand to mouth scene here as well. Any sudden demand therefore is likely to create pressure in the market , maybe that will not help in shooting the prices up but will surely be helpful in sustaining a specific price levels. The bullrun of USD against all currencies seems to be over and any fall in the USD against the Rupee will only strengthen the prices here in the long run.
Korea is estimated to still buy about 40,000 MT in the next 8 months on conservative consumption estimated.A portion of this is most likely to be supplied by India and even if this quantity goes to Africa it is more likely to support their price levels there and keep International prices within the current bandwidth.I have heard from my friends and colleagues in Africa that the arrival pressure is not picking up in Africa either. Sudan crop is being consumed quick and fast by Egypt and neighboring countries and is almost as expensive as India.Central American crop is not heard of to be any bigger than last year and with very high prices compared to Africa and India their crop is unlikely to create any sort of pressure in the International market this year. Turkey has still not entered the market but are likely to step in sometime soon as their domestic stocks deplete.China should be back in the market after they do the bulk of their consumption during their New Year Holidays.
If only 10% of Chinese population i.e about 130 Million people each buy/consume just one bottle of 400 ml Sesame seed oil ( 1 Kg Sesame gives about 400 ml Oil ) during these 15 days holidays, how much sesame is consumed?You do the math's :-)
Also not to forget the every Chinese family would make or purchase sesame seed balls of "jin dui" during these days because as per tradition their round shape and golden color it denotes "Luck". I read about this at
Once again in no way are we trying to say that the market could sky rocket but our belief is that it may not crash either contrary to some market sentiments.I would still refrain from jumping in the market suddenly as that could spike up the prices to unsustainable levels which may not hold for long , but would advice slow and steady buying and refrain from speculations and open positions.