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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 
 HALL 11.3 INDIA PAVILION
Mukul Gupta ( Director)
Shakumbhri Expo Impo Ltd
Tel   :- +91-131-2615164 , +Mob:- +91-9837084355 , +91-6396010144
Email:- mukul@shakumbhri.org
           mugupta78@gmail.com
Web:- www.shakumbhri.org

IFS,BRC & SEDEX CERTIFIED PRODUCERS/EXPORTERS OF SESAME SEEDS.(Since 1996)














4 comments:

Unknown said...

A perfect View on market

Unknown said...

A perfect View on market

Khunbow said...

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Unknown said...

Nice write up. thanks.

Don't fully get in the beginning your remark on "despite weak dollar" prices strengthened. This is usually the case when dollar is weak that commodities prices go up.

Else, wonderful written.

Thank you.