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Monday, April 12, 2010

Market Report 12th April 2010

Hello Everyone,

Its been a long time since I updated the market reports but as we all know there was very little action in the market to write anyways.

Last few weeks ofcourse has seen some serious action and now everyone is back on their toes trying to study the market and predicting the direction. Lets first look into the scenario that unfolded in the past 6 months i.e after the new crop.

1:- As everyone predicted and expected the crop was fairly good although not as big as the last crop but definitely a good sized one which could have sustained and fed the export demand well.

2:- We started on a low key and the crop was a little late but on anticipation of a good crop the exporters offered low levels which were fair priced enough for the buyers and they took in a good quantity.

3:- Then the usual Indian market mischief happened and prices shot up by 15-20% in 2 weeks time and everyone who was short was caught off guard.The stockist thought it was a repeat of the year before and speculated that the prices will go even higher thus hoarded the crop in a big way. Result was that the demand suddenly shifted towards Africa and prices started to come down slowly, however the stockist continued to buy trying to make an average.Even the farmers held back the crop and brought in less every time prices tried to go down.

4:- The Korean Tenders came and went, India got a substantial quantity but with even bigger stocks its failed to create any ripples.In fact prices move up in anticipation every time the Tender is announced and fail to continue the upward move even after the tender is declared as the bidders are mostly covered or prefer to wait a while before covering themselves rather than rushing into buying as they normally did in the past.

5:- Then came the big bang , Chinese demand was supposed to return after their new year break but all the waiting and expectations were dashed after they came ...they saw ...but they didn't buy.

6:- Stockists still held their nerves , in fact even as i speak they are still optimistic. The reason being that in line previous years where stocks were being held largely but corporate giants and exporters this year the stocking happened at very low levels Farmers , middleman , village level suppliers , yard based stockist etc with factories and exporters keeping very little in hand.

7:- Now when everyone See's that the demand is fairly low and the new Gujarat Summer crop ( Last yr is was about 60-70,000 Mt , this year should be 40-50,000 MT as well , I presume lower crop due to very very dry climate and lower sentiments in farmers due to prices) there is a bit of a panic and a lot of suppliers want to finish off their stocks so its kind of a fire sale going on right now.

8:- The USD has fallen to the levels of 44.30 , levels last seen about 2 yrs ago and with the improvement in economic conditions in India we don't see that it will be able to climb up any higher. The $ affect is bound to
keep the export prices in a certain bandwidth for some time now.

All this said and done we still believe there is another twist left in the tale :) Prices have bottomed out to some extent and the most stockists have already booked the losses and moved out.

I dont know how many people actually keep a watch over the world weather but the news in drought in China is quite alarming.
Although its still early for the new sesame crop sowing in china , my doubt remains weather the Chinese Govt would try to promote sesame sowing or rice/pulses/grain sowing this year as their food basket seems to behalf full at this stage and with food inflation still very high the decisions could be drastic.

In India as well the last 5 months have been very very dry and summers seems to be here early with Temp already touching 40 degree in some areas.If the summer crop is good and price do fall more from current levels it could mean that in terms of farmer the price that they get per Hectare would fall to almost half levels of what they saw a couple of years back and their might again be a crop shift as pulses are still very high priced.

The stocks in India and Africa are still presumed to be quite large and should be enough to last us till the new crop however its the prices of the old stock that can drastically affect the direction in which the new crop could move.A lot of exporters faced problems with default from Buyer's this year and the trade is getting a little cautious now sadly the new babies in the trade do get sucked in by greed and mis-information and the cycle continues.

However one thing is sure that in future we will see a lot more defaults from both sellers and buyers as the trade got dirty over the past few years with the sellers defaulting on low prices earlier and the some buyer's creating problems with high prices later on , now its almost common to hear such stories.