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Monday, December 10, 2018

Nov 26th Sesame Seed Update:-

It has been almost 50 days since the new crop arrivals have started.The crop as we all know by now was projected to be small and It is quite evident from the arrivals that the numbers were close to reality .The crop is short by almost 60%. As against 400,000 MTons last year we have a crop around 160,000-170,000 Metric Tons this year. 

Factors which pushed up the prices in Octoberwere
1:- A smaller crop.Panic from Supply side.
2:- A much smaller carry over.
3:- Anticipated domestic demand of India.
4:- Covering for the forward sales. 
5:- Stockiest being active at low levels. 
6:- A very strong USD which moved from around Rs 69/USD to around 75/USD in a short span.
7:- Anticipated strong global demand.
However ever since Diwali holidays got over the markets moved in the opposite direction , it was a natural correction which was inevitable looking at the one way movement of prices that happened for 3 weeks.

Factors which have made the correction happen are
1:- Everyone covered their short sales as a Stop loss in a rush.
2:- Almost anyone who is into sesame trade is now holding some stock , although I doubt the volumes are big since the value and prices are almost double.
3:- The Rupee gained back whatever it lost which means in Dollar terms the prices are almost same.
4:- The African imports have started to trickle in which will keep the supply chain well lubricated for the months to come.
5:- Crisis with money roll over as people bought for their forward sales as well and everyone would like to hold the cargo physically now, also the farmers dumped everything into the market yards as they got a good price for their produce and they need cash upfront.
6:-Since the markets were moving up so rapidly the buyers in general decided to wait and watch as the destination spot markets were lower than the Import prices being quoted from India.
7:- Profit booking from smaller merchants who had low price stock.
8:- Conservative buying by China which had good port stocks and decided to first bring its local prices up to global price levels.

Factors that will stabilize or push up the markets should be  
1:- The arrivals have dropped to historic lows, never in the past 18 years of my business have I seen that big producing states of UP/MP collectively put are less than 200-300 MT. Total bag arrivals from farmers are less than 3000 Bags in 2 States almost 20 Major yards put together. Rajasthan and Gujrat are substantially low as well.
2:- The strengthening Rupee once it stabilizes at around 69-70 range will leave the scope for local prices to rise which will start reflecting in USD quotes made to the buyers.
3:- People who imported from Africa wanted prices so stabilize in fear of defaults if prices kept rising,with the correction it has made things a little easier and I am hopeful that defaults from Africa will not happen in a big way, once their cargo gets loaded they will also want prices to go higher as the low priced imports were mostly forward sales but the high priced cargo's are mostly additional quantities. So the bears will suddenly switch side to bulls.
4:- Since the buyers waited it meant that a window of 2-3 weeks of low purchase happened which must have brought down the destination stocks to bare minimum, once the spot markets empty out the Panic at destinations will kick in.
5:- With replacement price still remaining high domestically the stockiest will hold on that much longer creating a tight demand supply chain. 
6:- No Buyer at High levels , No Seller at Low Levelsituation should prevail for all.
Overall I think looking at the global situation prices are fairly placed for the season ahead, irrespective of trying to catch the Bottom as buyer or Top as a seller it would be advisable to slowly be in the markets at all time to avoid getting into Panic buy/sell situation.Periodic corrections will happen and the movements this year will not be subtle but in 2-3% Range , thats more than $50 up or down at any given time.

India will have to import Sesame Seed from Africa in large quantities to keep its Hulling factories running and the last Korean tender showed us that the supply will be limited this year irrespective of High prices. In a bullish year with High Prices we always advice to try and buy the best quality, stick to the quality you know best.

We are of the opinion that the Sesame Seed prices will remain firm. With 10 months still to go the chances of UP days are more than the Down Days.