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Thursday, November 30, 2017

Sesame Seed Market Report November 30th 2017

Good Day Everyone,

The sesame season in India after a dull start finally got all exciting. Cheers to the bulls who've patiently waited for almost 2 seasons for something to happen. The Bears nevertheless are not ready to give up so easily either.

The crop size as per crop survey done by our council was around 330,000 Mt for the 4 Major producing states of U.P , M.P , Rajasthan and Gujrat. Like I said in the previous report this was a safe number but we will have to see if the safe numbers really stand ground this time.The quantities were more or less evenly distributed between the 4 states , however the survey suggested that M.P has the biggest crop which is again debatable.

Arrival Trends since 1st October, 2017

The first arrivals started a week before but we can discount those at the quantities was barely 100-200 bags put together,which is roughly 10-15 MT.The bigger quantities started from Oct 1st, there was a 5-7 days break in between due to Diwali holidays and of course each of the Market Yard follows a 6 day week.

So from the last 60 days , let us discount 8-10 Festive Holidays and 8 Weekly holidays, so total number of working days is 45.

Uttar Pradesh (U.P) Arrivals :-  The peak arrivals in the state of U.P have been about 15-16,000 Bags(80 Kg Each) , the minimum so far have been about 5-6000 Bags. Most days it varied between these 2 numbers so a safe average should be about 10,000 Bags.

(10000 Bags X 45 Days X 80 Kg )/ 1000 = 36-38,000 MT

Madhya Pradesh(M.P) Arrivals :- The numbers should be around the same but the arrivals started a little late and the quantities were higher in the start so factoring that we would assume the total arrivals so far have been about 35-40,000 MT.

Rajasthan Arrivals :- The arrivals started only around end October and the numbers do not suggest a number more that 7-8000 Bags in average so i would say the arrivals so far must have been around 25-30,000 MT.

Gujrat Arrivals :- Gujrat arrivals are a mix of locally produced cargo plus a lot of cargo which comes for resale from Rajasthan and MP/UP , then there is a lot of Black Sesame and a lot of Super White Natural which is almost 100% bought for local consumption and some old crop as well . Not factoring all that I would say the arrivals so far must have been in the range of 25-30,000 MT.

So Total arrivals so far( Rounded off) should be 40,000 + 40,000 + 30,000 + 30,000 = 140,000 MT
in all.

I could be wrong state wise but I am sure the overall numbers would add up close. Predicting a crop size can have a higher degree of variations but arrivals numbers should not have a variation of 10% at best , so for the Bears lets say the number is 150,000 MT and for the Bulls will keep this number.

If someone has the exact numbers i would love to have them , you can mail or WhatsApp me.

Where did all the Sesame Go ?

Average Indian export is about 25,000 MT Per Month which during peak demand months of Oct/Nov/Dec is about 30,000 MT per Month.

There was a sudden Chinese demand for Oct/Nov shipments which cleaned up a lot of old stocks and of course the new crop. Taking an average 2 week period for preparing and shipment of cargo for export we could safely conclude that a minimum of 60,000 MT has been Exported and another 10-15,000 is ready for export in December.

This should include the 2100 MT Korean Tender which needs to sail our ASAP.

As the buyers do book forward I am sure that whatever is sold for Dec is well covered. The cargo although sitting in the factories and warehouses is already sold and accounted for which means it will not make any impact in the market. Agreed that a lot of forward sales was hedged through Import cargo but that is unlikely to come into India before Jan so its safe to assume that Dec shipments at least are all locally covered , the Imports would be extra Incoming or Future Sale Based.

At a bare minimum anyone who is dealing in Sesame this season if he was remotely bullish would have bought little for stocking which even by conservative numbers should be 15-20% of the arrivals.

So adding up:-
a:- Oct-Nov-Dec :- Exported/Sold/Prepared/ToShip cargo almost    80-90,000  MT
b:- 15-20% Stocking must have happened at Yard levels i.e about   25-30,000 MT
c:- The domestic consumption from Nov-Dec-Jan should be about         30-40,000 MT

The domestic consumption would also most likely clean up the old stocks as well since there already is a sizable price differential between the two for quality reasons.

So adding the above we see that almost everything that has come in the new crop + Carry over stocks is accounted for.

Many would argue my numbers for Domestic consumption but it really is hard to judge the domestic markets size as things moves locally and in smaller quantities so we need to focus only on what the Domestic Market bought from the actual Arrivals at the Yard.

 The African Story so far :-

The Sudan crop which was expected to be bigger  is now looking smaller than last year. The big crop news forced everyone to clear their warehouses and the carry over stocks in Sudan were at bare minimum . Then there is their currency problem which makes the market very unpredictable. A short Sudan crop might mean nothing to the first world markets but in the Middle east markets and lately China it could create some anxiety.

The Nigerian crop although looking good has its own share of problems. The port congesting in Nigeria has created havoc with the shipments, delays to China means they are forced to look for alternate markets for supply which meant sudden quantum jumps, that may eventually cool down when normalcy resumes with the shipments but i fear it may have already done the damage.

Ethiopia is expected to have a good harvest , however with contradicting news about the crop being 10-15% less to same as before from different people , the benchmark ECX is trading at levels higher than before so I would assume either the Demand is high or the Supply is short.

Tanzania/Mozambique had a disaster crop this year and that means their supply to China from Aug onwards was not so heavy as it used to be which is clearly showing in the low stocks are Chinese ports. The Port stocks in China were below 50,000 MT Levels till recently. People argue a lot of cargo is on its way , but doesn't that also mean that a lot of cargo at destination is already out.

With little competition left to price match them the African suppliers will surely look to get the best value for their product and not offer as cheap as we think they will. Some argue that Africa jumps because India goes up and vice versa , once again its a  sweet little bubble we Indians like to live in. Africa now has the quantities , they have big giant Multinational companies and a huge single  Market like China and here we assume that we can manipulate all that overnight.

Well to each his own , Would be interesting to see how Africa play their cards this year , will they crumble under the pressure of Quantity business or will they realize that there simply is no volume competition globally anyways.

Korean Tender :- 

The Koreans floated a tender for 3900 MT few days ago which needed to be shipped ASAP , however at the first bidding the total quantities Bid from India were exactly 3900 MT , usually they are 2-3 times higher, in layman terms not many sellers interested. Ofocurse prompt shipment was one of the deterrent but there are surely enough Daredevils in India who would have loved to try their luck or do some profit booking if the opportunity was there. Anyways the bids were too high for the Koreans and they decided that the highest they could take was @ USD 1600 so very smartly bids of USD 1599 were accepted. However interestingly they managed to get only 2400 MT , I don't recollect the last time a buyer like Korea did not get the quantities it needed.

From Jan 2018 till the next crop even by conservative numbers the Korean Tenders would need about 50,000 MT of cargo.

Indian Domestic Demand :-

We've had this factor every year in Indian winters and it does make a grand entry trust me you. Last year in November my Prime Minister Mr Modi took a very bold and unexpected step of Demonetization which for atleast a few months created a severe cash crunch , the domestic market focussed on essentials and somewhere in all that frenzy the local consumption suffered. However things are back on track and the domestic demand is booming once again. I think everyone this year almost forgot to factor this major demand in Indian price scenario.

The Road Ahead :-

In a bullish trend a lot of cargo will go into stocks in anticipation of un realistic levels and will not come out in a rush so that stocking that has already happened plus the assumed FARMER hiding 40-45% of the crop should be in no rush to sell either. I really don't see where the pressure trigger would be for a huge slide back in near future.

So from Jan-September technically we should have about 120-150,000 MT Arrivals (Assumed Hidden by the FARMER) +Imports + Summer crop whatever numbers they may be till 2018 Crop.

In previous years I always said that there is enough in the market to last us the full season but this years numbers really don't seem to add up. Previous years small crop was compensated by the year before's huge carry overs but this time we do not have that luxury and cushion to fall back on.

Another interesting angle is , Since India recently banned Import of a some Pulses , a big chunk of those were being produced in Africa , the big guns there have huge investments and with Pulses out of equation they might be shifting their focus on Sesame since its a fast moving and relatively pricy commodity. Logically thinking its quite a possible scenario.

Indian Hulling Industry in the last decade got sucked into the trap of Volume Trade.

Hulled Sesame Seed ,a product where the price of Raw material is almost 90% of the cost ,to play volume game was simply illogical. Apart from the Salaries and odd overheads there wasn't  much to gain or loose. With Volume game came speculations and higher risks for little returns. 

 I think the lower available quantities to the Hulling factories will make them realize their old basics again, to concentrate on efficiency and healthy margins rather than speculations and wafer thin margins.

 Our Sesame Industry in India have worked really hard on Food Safety and Quality standards and its high time we start using our Experience ,Expertise and Performance to win back our market share rather than striving to be the cheapest.

What changed since September 2017 so far :-

 For a bullish market the bulls really need to get all their fundamental's right
1:- Low Carry over's                                         CHECK
2:- Less new crop                                               CHECK
3:- A steady and healthy export demand         CHECK
4:- A steady and healthy domestic demand     CHECK 
5:- Funds to hold onto stocks for longer          CHECK
6:- Low global availability of the cargo            CHECK

While for the bearish market the Bears only need to get one of the above 6 right and the market either falls or stays put.

The bears will occasionally keep getting one of the above 6 triggers right and markets will either correct or move sideways but to make it back into a Bear season they need to get atleast 3 triggers right at the same time for a long period of time , its for everyone to make his own assumption now.

Monday, September 25, 2017

Sesame Seed Market Report Sept 2017

Good Day Everyone,

Its nice to be back on my blog after a long long time , for all those who are wondering why I was absent , I think I owe them a brief explanation , well firstly there wasn't much to write about in a lack luster season and secondly the Health problems of my beloved Uncle, my mentor, my Business Partner who passed after a long struggle this May. Being in a family run business these things can hit you hard, more than any one can possibly imagine.

Well but life goes on and here I am back again Hail and Hearty ready for the journey ahead.

About Sesame now , what can i possible share that all of you already do not know. Hmm..let me start with some numbers.

World Sesame Production is now close to 4.8 Million MT , yes that 5000 Times 1000 ,
The Top 10 producers would be ( In descending  order of production )
3:- China
4:- Tanzania
5:- Sudan
6:- Ethiopia
7:- Nigeria
8:- Burkina Faso
10:- Niger.

The Largest of these would be India if I am not wrong producing about 700,000 MT in Total ( All Varieties and 2 Seasons) and Niger should be close to about 100,000 MT. The top 10 would easily be about 75-80% of the worlds total production.

Well where does all this sesame go then, Let's see. About 2 Million MT is being Exported/Imported,weather we take a Total of the top Importers or a Total of the Top Exporters
 it doesn't matter.
The Top 10 Importers would be
1:- China
2:- Japan
3:- Turkey
4:- South Korea
5:- Vietnam
6:- Israel
7:- Taiwan
8:- USA
9:- Syria/Lebanon/Iran/Iraq
10:- Saudi Arabia

The Largest of these i.e China is Importing close to 1 Million MT alone , Japan and Turkey are at 150, 000 MT and Korea Vietnam around 100,000MT . Thats a total of  about 1.5 Million MT in the top 5 Importers alone. The rest of the world is way way way behind at 500,000 MT in total.

Staggering figures , however these still leave about 2.8  Million MT unaccounted for , whats happening to that quantity? Well i would like to believe that is being consumed locally in the producing area's and also a substantial amount is being exported to Neighbouring countries through border trade like in the case of Myanmar- China or Sudan-Egypt Trade which justifies why those numbers do not show up in the Export numbers. India is exporting about 300,000MT but also consuming as Edible oil and Seed about 400,000 Mt locally.

While all these years we talked about Sesame on Hamburger buns , breads and Tahina , Sesame Oil has raced away quitely.

In any case the basic point remains that China is miles ahead of everyone else in its capacity to buy and consume and I think its still not the end of the road. I was in China recently and the general sense I got there was the Chinese are least concerned about the size of their own crop now and are Happy to buy from Africa.As we know the Sesame trade from Africa to China is more than just a commodity Business , it is deeply connected to the Forex exchange and the Import needs of Africa ,which are surely on the rise with each passing day.

Now to Indian Crop. After a lot of speculations , guess work , manipulations , survey's , statistics ,the trade I think has finally reached a consensous , India will harvest a good crop finally. The numbers will vary but a safe figure would be around 350,000 Mt ( All States combined ). Not a huge crop by any standards but keeping in mind the above stats its more than enough for India. We are still exporting close to 300,000 Mt and the current new crop should be good enough for that. We've had some rains in the past few days which might not have damaged any quantity but have surely delayed the harvest by about a week or so , if all goes well the harvesting will start in a few days time and we expect good arrivals around Mid October and then with a Diwali holiday gap to pick up by End October/Early November again.

Like I mentioned in one of my reports , India is a almost a Importing country now, for the past 2-3 years we have been more worried about where to source the cheapest raw material in volumes from rather than worry about where to sell those volumes , its a huge market for the Africans and in a weird tangle of being a supplier as well as competitor they are playing the game really smartly. India in the past 4-5 years is being beaten at its own game and with almost 70% of the Natural Sesame Export share already gone we have little to play with. The Korean tender is the last fortress standing for Natural Exports and with African & China eyeing that as well its only a matter of time that it will fall too.

So what will be the driving factors in the months to come, they remain the same as last year i guess with a few additions. In my last years report I mentioned as follows

We believe for a bullish market the bulls really need to get all their fundamental's right
1:- Low Carry over's
2:- Less new crop
3:- A steady and healthy export demand
4:- A steady and healthy domestic demand
5:- Good access to a lot of funds to hold onto stocks for longer period
6:- Low global availability of the cargo

While for the bearish market the Bears only need to get one of the above 5 right and the market either falls or stays put.

Well the bears did get that one thing Right and that was Carry Over's, no one expected that India and the rest of the world would be sitting on such huge stockpiles , the cargo just kept coming and coming and coming. Point 5 came in from time to time as well which held back any rallies that happened.

This year Point 5 i.e Access to Funds would be a major point at least for India and a 7th Factor which I would like to add would be Supply/Purchase timing. The Chinese are not so erratic in their purchase as they were a few years ago , like any smart and big businessmen they have adapted , they know the exact dates of availability of crop from every major country. They have the volumes behind their back , they know eventually they can dictate the markets the way they want it and its showing.

Yes of course their will be up's and down's , there will be times of high demand and slow patient waiting but at the end of the Day the one with volumes will make do. Once you have the capacity to move volumes you automatically can average that much faster and work on lower margins.

Where a Big European company would have an annual volume of 1000 Mt/Year the smallest of Chinese Importer can book that much quantity in a day and move the volumes in matter of weeks.

Silver lining at the end of all the story is Hulled Sesame Seed still remain the forte of India. We have the expertise , we have the capacity and we have the resources. Unless China suddenly removes the duty barriers and start duty free Imports from India , in which case they would take everything we produce , we are all happy to serve the world with our Hulled Sesame.

India has for long played the "Elite Bar" game , where the waiter tells you " Last Order Sir" and you panic and order more than you really need just because you don't want to end up short ,the African's quietly and smartly have opened a 24 Hr after party place where anyone and everyone is welcomed at any given time. There is no reason why the Elite Bar's cannot survive , it surely will but some things need to be corrected.

The Hulled Sesame buyer's sooner or later need to understand that they control the Indian markets now, we have no where else to go , its the bitter truth atleast for the time being. So if YOU don't Panic WE don't Panic. Cargo is available all throughout the year and when someone tries to manipulate the markets with 10-20-30 FCL's 500-1000 Mt go back up to the 4th paragraph and read the global numbers. How long can one do it, How long can one sustain a Rally or a trigger a drop ,now that Big corporates are invested with Millions of dollars into this trade.

In the recent past the buyer's split their business to smaller players , anyone who wanted to buy 2 FCL's was sending Inquiries to 10 people and waiting for the best offer to choose from , little did they realize that India is a very open market , the 2 FCL inquiry multiplies to 20 and gets blown to 40 so if you only have one purchase per year it would make sense to do it but as a regular you have just triggered the market for your next purchase. What you saved in the first purchase is all but gone by the time you come in again to buy the next one. A quite controlled purchase from limited people would any day be a better option.

Just like in Poker for a Flush and Straight sometimes you need to see the River card and not act anxious, the other guy might just be holding a pair at best , yes you make loose sometimes but whenever you win ,you win Big. Choice is yours if you want to play against 5 opponents or narrow it down to a 1 on 1.

When most of India's trade is based on " I think " &" I have a feeling" the big boys in Africa and China are playing by " I Know " & " I am sure " rules.

African Sesame is under EU watch and 50% of the cargo's being imported will be checked which means heavy delays and costs for the Importers. To start their pricing may win but when the panic will set it for timely supply I assure you the only option to fall back on is India. The overheads in Imports and the costs people will pay for delayed supply will start reflecting in the books soon enough.

On a personal note I doubt prices will fall to the lows it touched this season , the reason being a lot of carry over stocks have emptied out and that has eased the pressure , a bullish run could also happen due to this factor but now since Africa is always on Indian stockiest mind it could well fizz away just as quickly. A slow steady increase is more likely to sustain than a sudden rally. My conclusion would be that most bearish reasons have already be factored into the current levels apart from the New Crop Arrival pressure. Current levels are a good buy and going ahead expect a slow steady rise ,right upto last season's top levels at best. So the benchmarks would be 10% above last seasons low's and 5% above last seasons High's.

I look forward to the pleasure of meeting you at Anuga and serving you this coming season. Please feel free to ask for anything that you need and I shall try my best to serve.

We welcome you to visit us at the Anuga Food Show
Mukul Gupta ( Director)
Shakumbhri Expo Impo Ltd
Tel   :- +91-131-2615164 , +91-131-9219415164
Mob:- +91-9837084355
Email:- ,