SESAME SEED SUMMER CROP REPORT 2019

Dear Friends,

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

Sesame seeds production has been increasing over the years along with its demand.  The edible oilseeds coming in the assorted range of white, black & brown are one of the most favored crops to farmers for its resistance to withstand unfavorable weather conditions & grow with minimum attention. The growing popularity of sesame seeds as a functional ingredient in several foods on account of its ability to facilitate digestion and reduce hypertension is a key driving factor in the market. Furthermore, the rising application of the product as an anti-oxidant in various pharmaceutical formulations is expected to drive growth to the Indian sesame seeds market in the years to come.

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:

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

• 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.
• The USD started to strengthen which had a reverse impact on domestic prices as India struggled to achieve global equilibrium.
• 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.
• Sudan/Nigeria apparently had a good crop and with China not buying aggressively they shifted their focus to the 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 bottom-line 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 the physical availability of goods.

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.

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, that 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 is 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 month’s volume max. Expected Arrived will start mid of May 2019

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 hypocrite 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 get 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 over, 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, in fact 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 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 goods 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 losing a lot more than your competitor who will eventually take the market share from you whether 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 been factored into the current levels apart from the New Crop Arrival pressure. Current levels are a goods buy and going ahead expect a slow steady rise, right up to last season’s top levels at best.

CURRENT MARKET OFFER AS BELOW

Natural Sesame Seed, Sorted Clean 99.95% – 1775 USD/MT
Z Black Sesame Seed, Sorted Clean 99.95% – 2575 USD/MT

Hulled Sesame Seed- 99.90% – 1980 USD/MT
Hulled Sesame Seed- 99.95% – 2030 USD/MT
Hulled Sesame Seed- 99.97% – 2050 USD/MT
Hulled Sesame Seed- 99.98% – 2070 USD/MT

Ratilal Thummar

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