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Sunday, September 29, 2019

Sesame Seed Market Report Sept 29th 2019

Hello Everyone,

What a time to sit down and write about Sesame. The market is super confused , the weather is super unpredictable and everyone in trade is simply clueless. From the Buyers who refused to touch sesame 2 weeks ago saying prices will fall further to Sellers who were eager to empty their warehouses at any cost ,the tides have suddenly turned upside down.

If Olympics had a medal for Fear Mongering and Gossip our Sesame fraternity would win it hands down every Time. Our trade doesn't believe in alternate outcomes, each and everyone could give you a look into the future, give out numbers with so much confidence that it can create a self doubt on your own business acumen for a moment. Anyways to each his own , I'll just write my long observations as usual.

First lets see some numbers which would help up understand the picture better.

Number Games :-

Let me give out some official numbers first

Indian Winter Crop Estimates for the last 5 yr
          Indian Production ( Kharif)
2019-20                               Take a Guess

Indian Export Import over the last 5 years

The numbers above are little confusing because in India the Crop estimates are of Winter Crop in October while the Import/Export Data is from 1st April-31st March of the next year. Let me try and make sense out of these numbers with the exact data that is available with me.

Indian Export from 1st September 2018 till 30th July 2019 ( 11 months ) ---228,055 MT Export

Indian Import from 1st September 2018 till 30th July 2019 ( 11 months ) ---132,292 MT Import

As we can see from the numbers Indian Exports have dropped drastically and Imports picked up dramatically. If we assume that in the last 2 months Aug-Sept 19 the trend was same we roughly Exported 250,000 MT while roughly Importing 150,000 MT , using just 100,000 MT from our domestic production.

Since the stock situation is pretty much empty here in India at the moment I would assume we either consumed the balance domestically or in reality the last years crop was not even 190,000 MT that we thought it was, since summer crop of 2019 (Roughly 50,000 )is also not in warehouses.

It also means that we need our Domestic supply only in small gaps before Imports arrive or in small quantities by factories/Natural Exporters who are not Importing to sustain our Exports while our domestic consumption stands at roughly 100,000 -120,000 MT max on a YoY basis
(Excluding Quantities grown and used for Oil)

Whats happening :-  Really ,Whats Happening?

I wish I had the answer but like everyone else its all guess work at the moment.The markets were super bullish last year as they should have been since people had Old CarryOver stocks which were paying handsome returns meaning leverage to gamble big and more, also as we saw from the numbers the crop size was ridiculously small.

Then Vs Now  

1:- Last years crop was ruined premature due to heavy rains in August, by the time we got to harvesting it was pretty clear to everyone that it was a disaster, Exporters in India sold based on Import Parity from Africa and readily covered too. The markets got stretched to begin with when everyone rushed to cover shorts and stocks ,Once big volumes of Import cargos landed in India the prices just could not sustain the bull run. The trend continued all year long after that. 

The local trade in India understands this well now, they can  fire up and stretch the markets to a certain point after that the volumes from Africa just start to pour in and drowses the Fires. We saw a rally of about 60% in Oct-Nov domestically whereas the African markets went up by roughly 30% in that period. 

2:- This year on the other hand the sowing was fantastic to begin with , Sesame at the time of sowing was one of the highest priced commodity , the weather forecast of less rainfall this year was perfect for the Sesame crop ,irrespective of our opinion the farmers are smart and know what they are doing. They were right as reports of beautiful lush fields was coming from everywhere. On the Field trip I saw plants as high as 7 feet and full of pods so the yields should have been Epic this year.

Video Link to watch the Field Trip

3:- Everything was going smooth till Mid September, people were gearing up for a big crop, India started to refuse offers from Africa, Buyers started to refuse our offers in anticipation of the big fall when crop came in. Little forward business happened for sure but unlike last year it was not backed by huge quantity booking from Africa.Everyone thought they could wait and get a better deal later. 

This means that the Ripple effect got negated to quite an extent, last year India was buying aggressively in Africa so their price would go up say $20 , then Indian Suppliers would say see Africa is up we take it up by $30 , we were going round and round in circles for a while.

The TWIST :- 

1:-From "All is Well"to"What the Hell" Mother Nature suddenly decided it was all too boring, let's get some fun back into the game. So from the Driest July Monsoon we now have the Wettest Sept.

It started to rain in almost all Sesame Area's from Mid September and continues.I was on a field trip last week and although there was little damage that I witnessed and thankfully since the rains have not been strong in the past week and hopefully should stop in a few days time the damage should be under control even now.

All this talk and numbers now boil down to the next 4-5 days, If rains actually do stop we might still harvest a good crop, certainly bigger than last year, if they don't or the damage is actually bigger than we fear we might be down to numbers close to last year.

Its painful that after all the care and effort the farmers fate is decided by this 1 Week.We cannot even comprehend the Pain, The Agony of loosing a good harvest/a standing crop that the farmers will go though if things do go wrong. Let us hope and pray they don't , we still might get our Sesame from somewhere eventually but some poor farmers will go to bed on an empty stomach for a long time.

The End Game :- 

1:- Best case Scenario :- Rains go away , we find out damage was not as widespread and we harvest a good crop. Good is relative so I shall put out a number to it, 300,000 MT - 320,000 MT is good. Its achievable too in my opinion based on the massive sowing and yields that happened this year.

Whats happens in Best case scenario is that for short period the Domestic demand will kick in simultaneously with the Export demand and prices may/may-not rise depending on the intensity of crop arrivals at market yards, if they don't then we simply  Import less, even if they Do we start Importing Smaller Quantities. Both cases will cool off the prices slowly and stabilise them. Max movement in such a scenario should be Plus/Minus $100-$150/MT either ways.Markets remain range bound , Win Win for everyone.

Why because Indian Exports have dropped as we have had tough competition from Africa, first it was Natural but now even for Hulled. Our stronghold of Korean Tender has fallen this year and we might not be able to get it back unless we have a huge crop and price ourselves competitively. Pakistan Imports to India are not possible this year so they would concentrate to go direct into our markets and with a much weaker currency might push us out of some too since they have harvested a fairly big crop this year so we actually might not be able to export more in the first place so even this quantity may be more than enough.

2:- Worst Case Scenario :- Rains decide to stay a little longer, the damage that they have done is widespread and we get a relatively small crop , say 200,000 MT , that's 50% less than our normal crop of 400,000 MT + and also what people expected so logically speaking its as bad as it gets. Anyone predicting lower than this is either a Genius to have assessed the damager correctly or horribly misinformed about the extent of sowing.

Worst case Scenario would be more dramatic, we would start booking aggressively from Africa which would shoot up the prices there and the whole running in circles would start all over again, this would ease only after actual cargo's touch down at Indian ports.The next few months would be volatile but then things would cool down as it did last season, with 7 African Origins available for India to buy from ( Nigeria, Somalia, Sudan , Ethiopia , Burkina , Uganda, Mozambique ) we certainly are not going to fall short of Sesame for our Hulling Industry ever. It just takes a little while to get the wheels rolling thats all. Also there is a limit to which Africans can up the prices for Indian demand of say 100-150,000 MT because their prices are not directly linked to us but to the Chinese who buy 10 times more, if prices go up too much the Chinese demand slows down and halts the momentum to create an equilibrium.

Then ofcourse we have the Infamous " Bengal Double Skin " Sesame, once the prices move above a certain threshold this Oil crushing grades finds it way back into hulling and stops the bull by its horns.

Even for the worst case Scenario I dont see the markets touching last year's high anytime unless China has something else in mind. With Chinese Imports falling in the first 9 Months, a steady Port stock in excess of 150,000 Mt , a relatively good harvest in China and their New Year falling early in 2020 I doubt they are in a hurry to have more excess good when they can afford to wait.

There is no Korean Tender quantities left for 2019 so that is off India's back as well for the next 3 months.

Economy is not moving as fast as expected and with serious liquidity crunch in India the holding capacities are stretched, there is a political uncertainty in Sudan which means they would prefer to do back to back business rather than gambling on stocks. Currency demand in African nations is a major factor for their aggressive sales and I' don't see any reason why that is going to change anytime soon, they need the $'s so the volumes from there should continue to flow out as usual with little hoarding unlike in India.

I have a feeling if we don't panic we can have a range bound market all year long, definitely not a year to enter the markets when they are on an Upswing or to hold on to goods in anticipation of hitting unrealistic targets and certainly not a market to be greedy and to wait when the prices are on a slide to catch the bottom. Trade at all levels , go slow when prices are shooting up and stay equally clam when they are falling and the averages will be fabulous.

In the panic rally of last 10 days we are back to levels of 1 month ago and the way forward  all depended on the factors we discussed above. Current levels are still not overpriced in short run but also not attractive enough to go long either.

Its ANUGA time again and we look forward to seeing you at our booth.Please do spare some time to visit us. 

BOOTH NO- F-038 , HALL- 11.3, 
5th OCT - 9th OCT 2019. 

Bull markets are born on pessimism, grown on skepticism, mature on optimism, & die on euphoria.

Tuesday, May 7, 2019

May 7th Sesame Seed Update :-

Good Day Everyone,

With the Summer Crop ready for Harvest I thought it was time again to update.

After the disastrous Winter Crop in October, 7 months have passed and as expected it was a roller coaster ride with both Bulls and Bears getting their share of action. However comparing prices on a YoY basis we are still in a bullish phase.

Looking at some of the factors for the Up's and Down's :-

Run up to the Top :-

1:- With limited Old stocks and a much smaller Winter crop in October it was pretty must evident that the prices will shoot up, they went up dramatically and crossed $2000 levels for Natural  and $2500 for Hulled at one stage despite the USD being weak. 

2:- The panic multiplied as people who had sold forward wanted to cover their shorts and buyers who anticipated further rise covered excess volumes long.

3:- Stockiest saw a good opportunity and soon the market reached a situation where you started fearing defaults from suppliers and buyers practically started a double hedge on their purchase.Meaning the Importers in India who had booked African cargo for their forward sales also started to buy in India and Vice Versa. 

The Pull Down :- 

1:- We soon had a situation where prices in India were going up faster than the buyers at destination could adjust to, the low priced cargo's were being sold at a discount which caused a resistance for fresh buying as there was practically no price parity.

2:- The USD started to strengthen which had a reverese impact on domestic prices as India struggled to achieve global equilibrium.

3:- The Imports finally started to trickle in, now as we discussed these were the double Hedge cargo's which meant that most people now had excess cargo and fresh buying came to standstill as everyone was in a profit booking mode and fresh demand was slow as everyone had already booked excess.

4:- Sudan/Nigeria apparently had a good crop and with China not buying aggressively they shifted their focus to Indian market and fed them without any problem. With the supply lines well defined it got easier by the day and prices cooled down.

With all the factors being played out over the past 7 months the prices still managed to hold steady at a certain level, this showed the strong bottomline resistance due to lack of a big trigger. In commodities it is easier to push up the markets with sentiments alone but to pull back down is harder without a major panic trigger, which usually is physical availability of goods.

Statistics:- Official Government  Data (Rounded off)

                               2017-2018               2018-2019(Till Aug)          2018-2019( Till Feb)

Indian Exports       336,850 MT               157,580 MT                          286,662 MT

Indian Imports       26,270 MT                   13,360 MT                             70,650 MT

Assuming the monthly average remains constant for both Import and Export by the end of April 2019 we probably have exported about 325,000 MT and Imported about 90,000 MT.

For exports our volumes are pretty must constant as I had explained in my last report of
 5 Nov 2018 in discussion point number 5.

The import numbers on the other hand have seen a sharp increase, averaging about 9500 MT per month over the 6 month period for which data is available.

Bottom line is that over the past 7 months we have exported about 170,000 MT and Imported about 70,000 MT , since Imports are for Exports only I would assume all that we imported is already consumed or is in process and we have consumed about 120,000 MT from the last crop , plus we consumed a minimum of 100,000 MT for our domestic winter demand.

The numbers add up beautifully, IOPEPC as I have said before has been the closest to real crop predictions and the stock situation in India clearly indicates they were right this time too. Domestic supply has practically dried up, there is absolutely no talks of big stocks in any of the market yard with smaller quantities of 50-100 MT max being available with few people.

If you ask me to put a number on the stocks available in India at Market yard levels I would say in total not more than 25-30,000 MT all 4 major states (UP,MP,RAJ,GUJ) put together, thats about 350,000 bags of 80 Kg Each or about 1200 Truck loads. 

Breaking up the numbers even this looks highly unlikely.

Let us play God for a while and try to predict future :-

Stocks :-  Stocks in India and at destinations which can feed India the cheaper cargo's for Hulling are at an all time low. In India we cannot Import to re-export Natural so that factor is inconsequential, having said that even the destination which can provide good quality natural have limited supply.

New Crop in Africa :-

The crop in Tanzania look alright, with some contradicting report but there are some doubts over Mozambique crop. Overall nothing drastic that can create a panic or cool down the supply lines.

Summer Crop In India :-

The crop looks promising as of now, with no major change in sowing numbers or news of damage we are hopeful that the quality and size would be good.If I had to put a number on the size of the crop I would say about 40,000 MT but about 30% of this is Black Sesame and another 20% of Super White Natural which fetches a good premium for domestic consumption and hence too expensive for export parity. Practically speaking summer crop could ,at most supply about 20-25000 MT for export purpose which is about a months volume max. 

Port Stock in China :-

The last news was that their stocks have started to come down slowly, they have maintained a steady balance of about 150,000 MT but with low import volumes coming from Nigeria/Sudan/Ethiopia/Burkina the port stocks are likely to go down and will need fresh buying from Tanzania/India for replenishment as Mozambique crop is smaller.

Imports :- 

Imports from Sudan/Nigeria/Pakistan/Somalia etc which picked up pace have definitely slowed down, their supply lines are strained and with problems in Sudan and conflict with Pakistan these 2 origins are effected the most.

Sometimes I feel we are oddly hypocrital when it comes to Africa, the buyers in first world countries who speak of poverty and hunger in Africa have been telling Indian suppliers that their offers are above African quotes, which then prompt the Indian Hullers to try and bargain down prices from African suppliers even further to match their levels and the chain continues. At the end it is the African farmers who gets paid little less eventually.

Anyways having seen all the factors I have a feeling we are exactly in a situation which we were in October. Small Carry overs, Small Crop. The triggers are all but ready and the biggest factor would again be demand.The Export Numbers clearly suggest that volumes have not dropped , consumption has not decreased, infact the markets which were resistant to prices above $2000 levels have pretty much accepted them and slowly but steadily the bottom has moved up.

A fall in prices means that someone in China would step in and clean up the market, a major increase and India would start buying aggressively in Africa once again, with no stocks domestically to pull it down and no major import volumes expected to land quickly this rally could sustain and could only stop due to profit bookings and lack of demand.

I have given this example to many people and I reiterate again, No one likes to buy the last fruit on display even if you know it will only be available next season, however when the season comes and the display is stocked again with fresh arrivals we all jump in and buy despite the fact that our fridge could be loaded with something else.Human Nature I guess.
I think this is what will happen when summer crop arrives, everyone will buy a little bit irrespective of demand or need.

As for the prediction for the next 150 days till we see the next Winter crop in October, I have a feeling we have about 40 Days of Stable , 40 days of correction and 70 days of UP side left. 

The game this year has not been about price at all, for people who made money and those who lost the difference has been the timing of sale/purchase.The exit doors are becoming smaller and smaller and if you are playing safe and trying to catch the top or bottom, chances are you might never get through, on the other hand the people who are working with good suppliers and rolling volumes get more chances to cover losses if the made any and also make a lot of money when that sudden short time spike comes.

Looking at the way business has changed over the years I can safely say the Chinese Model of having good at Port/Warehouse/in hand/possession or say near consumption points is far more intelligent than having long term contacts in your books.If you are not covering yourself for spot demand and sudden spikes in prices you are loosing a lot more than your competitor who will eventually take the market share from you weather you like it or not.

My conclusion would be ,do not be Short, Carry little extra and roll that volume in tandem with supplier prices and do not cut edges with suppliers for small savings, in a product which costs more than $40,000 /FCL saving $500 by choosing the cheapest supplier can end up costing you $5000 eventually.Timing is the name of the game.  

On a personal note I doubt prices will fall to the lows it touched this season . A slow steady increase is more likely to sustain than a sudden rally.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.

We welcome you to visit us at the Anuga 
Mukul Gupta ( Director)
Shakumbhri Expo Impo Ltd
Tel   :- +91-131-2615164 , +Mob:- +91-9837084355 , +91-6396010144