Saturday, November 3, 2012

Market Report October 2012:FOCUS TOPIC- Sesame Oil

General Overview:
Sesame seed market is facing a new worldwide scenario: The increasing demand has overcome the production capacity of main growers. The use of sesame seed has spread in many new countries as part of daily diet, in different gastronomic cultures, in different plates… Some derivatives of sesame seed, like sesame oil, are also widely used in personal care and cosmetics industry, and for pharmaceutical purposes. The reason for the increasing use for sesame seed is the variety of applications it has now, and the raising consumption in developing countries like China, India, Malaysia, Indonesia, etc.,where people with higher income now are able to get better quality food.
News on next crop season:
a) Weather conditions:
Monsoon season in India lasts 4 months and represents 75% of the annual rains. This rainy season started in June and it is about to end, with 22% lower level than the regular average. Indian authorities have made an official declaration of drought in that country.They are waiting for rains to improve in the next weeks, as this is the only source of water for more than half of the production lands. On the other hand, and considering all conditions previously mentioned, growers are expecting sesame seed crop season to be delayed in at least one month.
We have received weather reports from the USA indicating also droughts and bad weather conditions for oleaginous seeds production states.Last year was recognized by Mexican authorities as the driest in the last 70 years. This year, on the other hand, has been the one with the highest level of rain in the last 6 years.Both situations do not allow the farmers to have constant production levels and be efficient. Sesame seed crop is based on rainy season, but too much water may damage the seed. This situation may delay Mexican crop this year. South America has been facing a season with rains above the regular level. In some regions with high lands, like Peru and Bolivia, cold weather has been so intense that part of their crops was lost. Late rainy season has damaged a lot of sesame seed in the farms(they will have sesame seed, but it would be low quality).
Africa has had favorable weather conditions for sesame grow. The amount of land cultivated with sesame seed has increased, and the yields have been better every year.Nevertheless, the major part of their crop is addressed to cover China needs. China has developed different African countries as raw material suppliers to complete its requirements that are bigger than its internal production capacity.
b) Market situation during the last 7 weeks:
Some weeks ago we started to detect movements in market, mainly prices rising up because of low stock levels, high demand from Eastern countries and the news about bad weather conditions in production areas. Sesame seed price has gone up between 20 and 22% in the last weeks. This price change was also supported by the last Korean tender. Korea bought 12000 tons of sesame seed unhulled, at prices 18% higher than in last Korean tender, and much higher than last year. Those processing sesame seed in South East Asia are saving the very few seed they have left to offer it at expensive price in the next Korean tender.
World Market News:
Regular sesame seed crop in China is estimated in 750000 Tons per year. In the last years, the consumption of sesame seed in China has surpassed the supply, with an estimate of 1,000,000 tons. The difference between their production capacity and their needs is bought in Africa and in South East Asia. However, there are many rumors about a bad crop of sesame seed in China for this year (September / October), which will have a direct impact on price worldwide: If China produces 10% less than the year before, it would be the equivalent to the loss of the complete production of Latin America. Every time we found this kind of rumors in China, international prices go up. China, as we known, it is the biggest producer of Sesame seed in the world.
not increased further thanks to its depreciated currency (Rupee), whose value has decreased 18% against the US dollar, compared to August 2011. How long is it going to last the Ruppe with that devaluation level? It is hard to predict, India is a country with deficit in production of basic food, like seeds, oils, grains and beans, and they can not live with such a weak currency all the time, they think the government will help Rupee against dollars in the next months. It is important to remember that India produces 320000 tons of sesame seed per year, and last crop was close to this level.
Annual production of several African countries as reached 200000 tons. African countries have a strong commitment with China, who has financed African infrastructure in the last decade. By buying sesame seed and other products from Africa, China is securing that they will have funds to pay back their debt.
Mexico and Central America:
In Mexico, farmers have been discouraged to grow Sesame seed. Prices of corn, sorghum, beans and other products are much higher in the market; besides, farmers growing these kind of products (mainly corn) receive strong financial support from the government, which they do not see if they decide to grow sesame seed. We have been working with farmers to encourage them to keep cultivating sesame seed, by securing them the market and purchase volumes. The bad mood among farmers was increased by the damage that Joba Hurricane left in the farms last year (they had grown a lot of sesame seed and part of it was lost with this hurricane). Loans from government were addressed to corn and tropical fruits growers (which are more profitable products than sesame). This year we expect a crop similaror lower to last year, below the 20000 Tons. If this trend continuous, the price difference between Indian sesame seed (low quality / high microbiological risk), and Mexican sesame seed (high quality, good taste, minimum risk sesame seed), will decrease, making the Mexican sesame seed more attractive to industry.
South America:
After a crop record 2 years ago, South American countries have suffered excess of rains in the last 2 crop seasons, and this made the average yield to decrease. This year Venezuela estimates to harvest 18000 Tons out of the 26000 tons they were originally programmed. Besides, big portion of the seed they got was damaged by the rain, and it may be lost. Season was also bad in Paraguay, estimations say that 15000 Tons out of the 36000 originally programed. We estimate a total of 50000 tons in all Sout America, (below the level of other years).
IV. Final Comments:
We are currently facing a new scenario of rising prices, the expectations for season 2012 / 2013 are on high price. Some contact people we have in China and India talk about reaching the price levels we had in 2008, at $2800 / $3000 usd / MT). Those companies that booked contracts for the complete year are protected against this volatility and it is confirmed they made a great deal early this year. It is recommended to keep an open and constant communication with our company, in order to organize something together. We will be monitoring any possible change, to be ready to buy raw material in the best possible time.

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