Sesame Seed Monsoon/New Crop July 16th 2014

Hi Everyone,

Been a long time since I updated the post , actually there was nothing much to write anyways. Everyone had their own idea's of the Market and without numbers in hand it made little sense to counter the predictions/Guesstimates and view of the market.

Lets first look at some of the things that have happened in the past few months.

1:- Summer crop in Gujrat came out and although everyone put out numbers in excess of 150,000 MT , the official survey reports pegged it at around 115,000 MT.

2:-  The hulling industry saw the birth of another quality this year from Double Skin Bengal Brown Sesame seed. I had my apprihensions about the quality and I continue to do so. Thankfully people are now atleast offering it a different grade altogether so that buyer's now have a choice weather to buy cheap chemical laden product or opt for the Premium Product. The price difference is almost $200-$300 PMT so you need to be careful what you buy and from whom you buy.

If you buy the cheaper grade at cheaper quality knowingly its perfectly fine and a personal decision but incase someone sends you the cheaper quality at a slightly discounted price compared to the Premium it means instead of saving $100 PMT you probably lost $200 and now you work with the risk of selling substandard quality to your premium grade buyer's.

The Brown Sesame Grade is here to stay so everyone needs to be extra careful from now on.

3:- The stock levels as rightly predicted have touched a all time low , Stocks in the states of UP, MP and Rajasthan have almost finished. Atleast for UP and MP I can predict with utmost confidence that they might not have more than 5000 MT put together and even this is a exaggerated number.
I wouldn't be wrong in saying that the only reason buyer's have been able to buy from India and India has been able to export Sesame is because of Gujrat Summer crop from Mid May onwards.


Now to some numbers

1:- Gujarat Summer Crop :-
Arrivals started around 15th May,Peak arrivals around 25th May and Dipped again around 25th June. Peak Arrivals average around 25,000 Bags/Day or about 2000 MT/Day.
Slow Arrival Average around   8,000 Bags/Day or about   600 MT/Day
      Peak Arrival Days :- 30 , Slow Arrival Days :- 30

Total Quantity = (30 X 2000MT) + (30 X 600MT) = 78,000 MT. This number might still be off by 10% so lets assume we've had a crop close to 90,000. Even though I never put a number our regular clients will know that we never estimated the crop to be above 100,000 Mt .

Some people might argue there were days with 35,000 Bags/Day arrival as well , so to factor in the odd days I have taken a average without considering the holidays or carry over sales of the day.

2:- Indian Sesame Seed Export Import Data for the past 2 years
Export

S.No.	HSCode	Commodity	Unit	2012-2013	2013-2014	%Growth
1.	120740	SEASAMUM SEEDS	MT	299,482.29	257,443.09	-14.04

S.No.	HSCode	Commodity	Unit	2010-2011	2011-2012	%Growth
2 .	120740	SEASAMUM SEEDS	MT	398,441.17	389,154.01	-2.33

Import

S.No.	HSCode	Commodity	Unit	2012-2013	2013-2014	%Growth
1.	120740	SEASAMUM SEEDS	MT	38,050.45	72,928.09	91.66

S.No.	HSCode	Commodity	Unit	2010-2011	2011-2012	%Growth
2	120740	SEASAMUM SEEDS	MT	8,727.92	609.28	-93.02

Interesting number's these. You will notice in the past 4 years the Exports from India have dipped by almost 140,000 MT but the Imports have risen by almost 70,000 MT.

India cannot import Sesame for domestic consumption so all that we are importing we are re-exporting.
Its a similar pattern to what China had till it became a net Importer. The domestic consumption in India is rising and the buyer's here are willing to pay a better price as well with less headache and faster payment terms. The African markets have opened up for everyone in the trade and India I believe is one of the biggest buyer from Africa now , weather they import the seeds into India or get them exported directly to various destinations is another story.


Current Situation and Future Predictions :-

1 :- Anyone thinking that the stockiest in India are sitting on huge loads of stocks in their warehouses is in for a big shock in the coming months. The stock situation is at a all time low in every sesame producing area and whatever little there is left should only be enough for India to sustain its export demand for the next 3 month until the new crop arrives.

2:- The monsoon is really weak in India and with almost 40% less rainfall the situation looks unlikely that it will improve. The late rains means that sowing in most areas has not even started now.
Going by the data available online

 "In oilseeds in particular, there has been 83 per cent drop as of last week July vis-a-vis July last year in terms of the area under sowing. "

"Sowing of most kharif crops barring paddy is significantly lower than the corresponding area last year. According to agriculture ministry data, a total of 25.6 million hectare area has been down as on July 12, half of the corresponding area of 51.76 million hectare sown in the corresponding period last year. Most affected is the sowing of crops like pulses, coarse cereals, oilseeds and cotton"

 "As on July 15, cotton sowing is done on 10.19 lakh hectares against normal of 27.17 lakh hectares, while groundnut sowing is 5.41 lakh hectares against normal 14.39 lakh hectares in the state. Total area under cultivation in the state is 11.25 lakh hectares as against the normal 26 lakh hectares."

"It would be a blind bet for the cash crops because rains are uncertain and the crop may fail. In this situation at least the farmers have to save their cattle by making adequate fodder available.The present rainfall is insufficient for sowing of cash crops because it would require more moisture in the soil. But with such rains, fodder is an option for farmers to survive their cattle"

Even if we assume that these estimates are wrong we can safely say that the sowing will be short and even if the rains come today and sowing starts tomm , which i don't think will happen anyways looking at the rainfall situation the sowing area is unlikely to be anywhere near what it was in the previous years. Even if the sowing finish by End July , the new crop will not be available before November now and that means for the next 3 months India will absolutely finish every last kilo of Sesame stock and might go into African markets aggressively to shop around , taking the global prices higher and higher till they can be cooled down by the new crop.

3:- The new crop predictions should start as usual in September-Early October and any bad news can create further panic , we also have to keep in mind that even that little new crop will be on the mercy of the rains , we have seen in the past few years what damage the last few weeks of rains can do to sesame seed crops.

4:- The festival season and Winter demand for the domestic markets in India should also start around Mid October and with no new crop in sight the old stocks will quickly be diverted to the domestic market where they fetch a better price. 

5:- I am not implying in anyway that the buyers need to stock their warehouses today in anticipation of price rise , there still are many factors which can cool down price

a:- Good crop in China and Myanmar , this will divert all the Chinese and to an extent the South Asian 

     Oil based demand.

b:- Drop in demand , again I say demand and not consumption. If on the shelf it will sell.

c:- A huge crop in India in a range of 250,000 -300,000 Mt.

d:- A normal to huge crop in Africa

e:- Currency factor is always there

Looking at all the factors above we believe there might be another bullish year ahead , atleast till December when African markets will once again determine the fate of prices for the next few months.
However with global prices available to everyone on real time basis atleast "WE" would not be naive enough to think that Africans would sell their cargo at throw away prices when they know for sure that no one else can fill in the global supply gap. With carry over stocks worldwide at all time low chances are we would continue to move hand to mouth basis for the next season as well.

Looking at the global scenario my suggestion once again to the buyer's who like to do business on a long term basis is to get into collaborations with actual Manufacturer Exporters rather than relying on fly by the night new suppliers and brokers. You might get lucky with small trader's once or twice but for a larger picture you do not even realize that slowly you are getting sidelined in the business and someone else is taking up that space. The only way to move forward in this global economy is to have a stable and reliable supplier base.

Switching to inferior quality in tough times might look like the best option initially but by the time the world spins around again you would find yourself on the wrong planet altogether.

Tough choice but thats what life is all about.