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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.