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Monday, February 17, 2020

Sesame Seed Market Report Feb 17th 2020

Hi Everyone,

I was just going through my last report of September 2019 and found that our assumptions were true to quite an extent.

https://sesameseedmarket.blogspot.com/2019/09/sesame-seed-market-report-sept-29th-2019.html

"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."


That was good 5 months ago , Lets talk numbers now to first understand what worked and what they have in store for us over the next few months.

Indian Exports in the Last few months viz a viz Previous year.

                                            2019                            2018
September                     22,400  MT                 31,500 MT
October                         23,480  MT                 26,650 MT
November                     26,540  MT                 22,120 MT
December                     37,400  MT                 24,070 MT
                                     109,820 MT                104,340 MT

Indian Imports in the same Period

                                         2019                            2018
September                     11,090 MT                  7,100 MT
October                         11,100 MT                 13,800 MT
November                     29,500 MT                 21,400 MT
December                     19,500  MT                 25,500 MT
                                     71,190  MT                 67,800 MT


Mostly stagnant, only the sudden spike we see in December 2019 was due to the Indian Government notification of Export Incentives being discontinuing from 1st Jan which lead to exporters rushing and trying to move the cargo faster. I belive the January 2020 Data when its available will show that the Exports have fallen or stabilised in Jan 2020. Import I would like to belive should remain in the range of 20,000 MT for Jan.

Indian crop despite all odds, our expectations and according to the survey given by IOPEPC was about 300,000 MT which I think holds true. We saw peak daily arrivals in Mid October- End November in all 4 major states i.e UP/MP/Rajasthan/Gujrat touch 30-35,000+ bags collectively , so that's about 2500 MT x 45 days which makes it about 120,000 MT , in December is dropped down to say half of that so thats roughly 40,000 MT  and say around 500 MT per Day since Jan till now which should add the numbers to around 200,000 MT .

Apart from this I would assume about 20-25,000 MT volumes would have gone directly from farm to stockiest or arrived in smaller market yards data for which is not extrapolated properly. The balance will trickle slowly and steadily in the next 5-6 Months.

SPOT and FUTURE :-

Markets right now are at their lowest of the season but still in the range of Plus/Minus $100-$150 from the highs, it would be interesting to see if they can breach the bottom or revise upwards in the coming months .

What we see at the moment is limited supply and a stable supply line but a slightly discounted/aggressive selling from Hulling units to keep the volumes flowing, once the volumes are covered the discount goes down , so the best price is only for the people who enter first and after that its the same for everyone else who steps in. Yet we see hesitation in the market.

The trade needs to understand that Sesame is now truly a global commodity, with goods flowing in all directions and every 3-4 months there is a crop coming out somewhere which can change the basics of price assumptions depending on its size and demand.

Major Crops flow globally is as follows

China( September) ---> India/Myanmar (October ) -----> Sudan/Nigeria/Burkina/Ethiopia( Nov-Dec)-----> Somalia( Jan/Feb---->India Summer (May)--->Tanzania/Mozambiue/Myanmar(June/July)

I could be off by a few months for some origins and missing some,  but I am sure you get the basic point. The play is not " Who has how much " , the play really is. " Who needs what , WHEN" , its all about the timing , the consumption pattern worldwide have been well defined with sporadic and short bursts of Demand and dull periods , these rarely change the consumption volumes but do bring in the sense of false triggers. There is definitely a consumption growth worldwide but its not concentrated, its mostly spread over the whole year and all destinations combined.

We also need to understand that there is a consumption and production limitation everywhere , India can Import or have any size of crop  but there is a top line in terms of production that it can manage, If my maths holds true we roughly have a built up capacity of Max 25000-30,000 MT for Hulled + Natural Sortex Per Month , Natural/Black etc of course can be anything more depending on what grade is Exported. Similarly Imports into India are limited to few countries depending on the lowest price available , above a certain threshold India just cannot afford to Import since we need to Re-Export Hulled from it , so one origin might have all the sesame and India might be totally empty but we just cannot Import unless the price works out for Hulled Sesame. This limits our options dramatically in the world trade.

China/Africa :- 

This is something the world was not ready for, when Corona Virus started we all thought it would go away soon but it seems to be getting bigger and as on today it shows little sign of slowing down.
We all hope that it will go away soon and normalcy will return to China and the rest of the world. However since China is by far the biggest Consumer of Sesame we cannot deny that it will certainly have an impact on the volumes. Just heard that they are replacing/Sterilising  their Currency Notes since they could be biggest carriers in cross contamination, if its come to this I doubt things would be back to normal in a hurry. Even when the virus goes away it might take weeks before people flock to restaurants or decide to eat out as they used to.

FOOD FIRST , Since everyone is taking precaution in China I would assume that at the moment people would be stocking food in their homes in eventuality and anticipation of the worst , which means most products on the store shelves have either already been picked up or will get consumed/picked up soon enough.
Since most factories are closed or working below capacity it is highly unlikely that the shelves will be replenished anytime soon , that specially since things like Sesame Paste/Sesame Oil/ Sesame cakes etc are not necessary/staple foods for the masses. The "HOTPOT" culture has taken a hit , it was one of the major consumption points of Sesame Oil/Sesame Paste and it might take a while for that to return to normalcy as well.

The port stocks in China are surely moving slowly and the cargo already afloat will eventually reach them too , however from what we have heard they are slow right now in fresh purchase from Africa and the congestions created at the Chinese ports might delay fresh order shipments.

Having said all that we know that the Chinese market is a Giant and they know how to bounce back , if the Virus goes away soon enough and they decide to push up the production to replenish the market and build up surpluses we are in for a wild surprise.

This probably is that most difficult part to predict at the moment and things could move either ways.

Looking at the worldwide stocks I have a feeling that atleast till May when Indian summer crop harvests we should be range bound despite the above fear. Indian government has still not clarified if the Export Incentives will be available after 31st March or not. If they don't then Indian prices will definitely move upwards by 2-3% Minimum in the coming months.

Since India is more or less Import dependent at the moment as you saw from the above numbers a slow down could mean that we are also apprehensive in Importing big volumes as well , this could create a strange situation, if and when the demand revives and which probably will coincide with the Chinese demand the African levels may see a sudden spike since both China and India will enter at the same time and the spot markets here might panic even more due to limited volumes.

Overall I can sum up by saying current levels are pretty attractive for at least 3-4 Months ahead, slow but steady volumes in both buying and selling should yield good returns.I would not suggest  Speculating in either Short/Long positions in big volumes, the best strategy would be to have a rolling stock at all times to protect your top line and to at least cover the stop losses in eventuality of swings in your supply lines, the markets may panic anytime which more often than not results in wrong decisions for both spot and futures.

Someone wise once said "Far more money has been lost by people preparing from Corrections or trying to anticipate Correction than has been lost in taking the Correct decision."





















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