Blue Nile Research – Sesame 03-04-17

Sesame Weekly: 03/04/17

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1. Ethiopian sesame prices continue in the down-trend but very slowly

Humera prices have not moved in the last two weeks but in that time, daily prices have experienced a large c. 6% range. The longer-term Humera price trend is down but price movements are volatile around this decline (Exhibit 2).

In contrast, Wollega prices have fallen c. 5% with gentle volatility (Exhibit 3). It is interesting to note all Wollega grades at the ECX are converging in price. The market is not allocating a premium for fewer contrasting colours as buyers are focusing more on Wollega flavour and oil content.

Exhibit 1: Sesame FOB export prices

As of 31 March 2017, one-month date range

* did not trade in previous session
Source: Blue Nile Trading Ltd., Ethiopian Commodity Exchange

Exhibit 2: Three-month Humera FOB price trends

Source: Blue Nile Trading Ltd., Ethiopian Commodity Exchange

Exhibit 3: Three-month Wollega FOB price trends

Source: Blue Nile Trading Ltd., Ethiopian Commodity Exchange

2. China continues to dominate Ethiopian sesame buying which draws attention to how leveraged Ethiopia is to change in Chinese demand

Weekly ECX trading volumes have been stable in the last four weeks with volumes averaging c. 7,000 MT per week. Wollega demand has increased, especially from China, and we are now at back to the historical 60:40 Humera to Wollega ratio. During January and February 2017, China represented the bulk of sesame buying with over 56% of all purchases. Israel, U.A.E. and Vietnam were next largest export destinations.

Since there is approximately a one month lag between ECX trading and exports, these low sesame trading figures is leading indicator of the continued weak export numbers and a signal for the impeding supply surplus shock.

Exhibit 4: One-year ECX sesame trading weekly volumes

Source: Blue Nile Trading Ltd., Ethiopian Commodity Exchange

3. The Ethiopian sesame market has been weak relative to previous seasons

This season’s sesame exports have been weak. By analysing export data, we can see that exports from October 2016 to the end of February 2017 have totalled nearly 120,000 MT. Over the same period in 2014 and 2015 these numbers were 196,000 MT and 190,000 MT respectively, indicating a decline of nearly 35%.

Since current sesame prices are lower compared to previous years, these low export numbers are due to weak international demand. We have indicated in previous sesame newsletters the weakness in the sesame market and the potential of a large sesame surplus as the season ends. Therefore, we are bearish prices in the short and medium term.

Exhibit 5: Ethiopian sesame exports and weighted-average export prices in the last three years

Source: Blue Nile Trading Ltd., ERCA

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