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Saturday, April 14, 2012

sesame seed April 2012

Hello Everyone,

Finally some movement in the sesame markets. Last six months as we all know were quite boring with the prices moving sideways or downwards most of the time.

When I look at the export numbers ,the demand has not really gone down , the quantities remain the same with slight fluctuations over the past 3-4 yrs average but still the feeling was opposite.It seemed that the buyers were purchasing less , people were eating or using lesser sesame but the numbers really say that was not the case.

What i really think is that the market dynamics have changed quite a bit over the past few yrs , traditionally Oct-March were peak buying seasons and most buyers covered enough in these months to sustain their sales till May-June, then in June-July-Aug we saw slow demand and then buyer's would wait a month and rush for the new crop in October again , this was the trend in past. What I think has happened now that with so much volatility in the market the buyers are buying more back to back hence the demand-consumption in the months of Oct-Mar is slow and stable.

However that also means that the buying will continue all year round now and that we do not see the so called " off season " anymore. From the average that we have the monthly demand still stands at about 22-25,000 MT per month or about 260-300,000 MT per year. The demand pattern are more of less same every month, with slight variations when the Korean Tender exports are made which are usually 4-5 times per yr.

Now getting back to the Current situation.

What happened ,why the sudden rise? A question that everyone has on their minds at the moment.Well there are a few points which collectively are responsible i think , lets look at them point by point

Start of the season everyone said the crop was lesser than previous years , True. Everyone was Bullish , True .
A lot less long term business was done , True.
Everyone is India had excess stocks , True.

Then the demand factor stepped in,demand was slow for reasons discussed above and everyone was caught off guard. The strong USD played its part and prices looked low in terms on $ but in reality they were still strong in Rupee terms. Soon the Hulling factories had no option but to keep selling at discounted prices to keep the machines running although the raw material prices kept stable in Rupee terms.

2:- Everyone kept ignoring the facts and got rid of their excess stocks by Mid March and never covered again thinking why stock when the market is not moving anyways.
This goes both for suppliers as well as buyers.

3:- India has a total of about 800,000 MT of sesame , White, Brown , Black , Red( Double Skin for Oil Crushing ) and we export about 300,000Mt that means the rest is always consumed domestically for Oil crushing , we keep ignoring this factor and this time it caught up with us. The Crushing crop in West Bengal and South India were short and they starting using other grades which resulted in some panic.

4:- African crop was not as big as it was assumed to either , from what we know they are out of stocks as well and that means the middle east demand has shifted to India. Egypt which traditionally buys 90% of Sudan seeds is running short on supplies and has been covering from India slowly.

5:- Stockist had covered material at higher levels at the start of season and after sitting on the stocks for last 6 months they see a glimmer of hope that they can make money , the weaker one's have already sold out but the stronger one's who hold the cargo can afford to wait a few more months and create a artificial shortage in the market.

I still believe there is enough raw material in the market for everyone but will it be available at cheap discounted prices anymore is a big question. Personally i doubt it. I also believe that if prices are too high the demand might slow down , although it has not been the case with many other commodities which moved up 50-60% in the last year , Guar , cotton, Mustard , Soya , Peanuts have all been bullish.

The point is there is no long term substitute to Indian Sesame even if the prices go crazy, who will sell cheap? Africa moves in tandem with Indian prices anyways , even if they are less by 5-10% how many buyers can switch their demand overnight and start buying from there. Its easier said than done. South America is way too expensive anyways and even if we reach their levels and the demand shifts there i doubt they have the capacity/stocks to full fill the increased demand.

Summer crop in India which comes out in May-June might help ease the prices or might add fuel to the prices . If the supply side remains quite for the next 1 month and stock inventory goes down then their might be a mad rush to buy the summer crop and that might trigger another bull run.

Overall i believe situation is still well under control , the prices reasonable and still no reason to panic. The buyer's have seen low levels for the past few months and now they can continue to buy a little more at current levels and still have a good average before things go out of hand.