Blue Nile Research – Sesame 29-10-18

Blue Nile Trading
   Ethiopian Commodity Market Research
Agriculture Trading Report from BNT Research
Monday, 29 October 2018
Market Viewpoint

Sesame Market Update: 29/10/18

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  • Ethiopian sesame prices fell c. 20% in September as suppliers sold old crop cheaply, making space for new crop. New crop Humera grade 1 has started this season at c. 1,750 USD per MT FOB
  • Forecast sesame crop yield for MY 2018/19 is c. 350,000 MT, in line with previous years, with Humera forming over 70% of availability
  • October and November tend to be the most volatile trading months for Ethiopian sesame, so we could expect price swings of + / – 20% in the next two months

1. Ethiopian sesame has experienced a 20% price correction prior to new crop entering the market

New crop of Ethiopian sesame (year 2011 in local calendar) has reached the market and c. 1,000 MT has traded so far (99% of it Humera type). Current break-even prices for Humera grade 1 are approximately 1,750 USD per MT FOB Djibouti (Exhibit 1). Wollega pricing is less obvious with very small quantities available.

In the lead-up to the new season, exporters have been clearing new stock from their warehouses and we saw a large 20% correction in the last week of September (Exhibit 2).

Exhibit 1: Sesame FOB break-even export prices

As of 12 January 2018, one-month date range

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

Exhibit 2: Ethiopian sesame FOB price trend in the last six months

Ethiopian sesame price trend

Source: Blue Nile Trading Ltd., Ethiopian Commodity Exchange

2. Ethiopian crop yield for MY 2018/19 is in-line with historical production

Ethiopian sesame exports were strong during MY 2017/18 with ECX (which accounts for c. 70% of sesame trading in the country) sesame volumes at c. 250,000 MT (80% Humera, 20% Wollega). The crop yield for MY 2018/19 is estimated to be c. 350,000 tons and is in-line with previous years.

Strong demand last season was due to last October’s 15% local currency devaluation, which saw buyers purchase almost 50% of the crop available between October and December (Exhibit 3). Since then, sesame prices rose throughout MY 2017/18 and volumes dropped off considerably.

Exhibit 3: ECX weekly sesame trading volumes for the last two years

Ethiopian sesame trading volume

Source: Blue Nile Trading Ltd., Ethiopian Commodity Exchange

3. Sesame markets are volatile so buyers should be aware of price swings during contract negotiations and trade execution

Markets are generally efficient and only move when new information becomes available that differs to the consensus market view. Clear examples of this occur in various agricultural commodity markets during crop report data releases (soybean, corn, wheat, coffee futures etc.). These reports provide accurate crop yields and volumes and, when different to market expectations, can cause volatile price swings.

Ethiopia sesame market acts in a similar way. In the last four harvest seasons (Exhibit 4), there has been three large price moves where actual yields have differed to expected, often moving the market +/- 20% in a couple of months. October and November tend to be the most volatile parts of the sesame calendar which means fast execution of trades need to take place to avoid defaults from suppliers.

Exhibit 4: Ethiopian sesame price analysis during harvest time from 2012 to 2017

Ethiopian sesame market

Source: Blue Nile Trading Ltd., Ethiopian Commodity Exchange

Thank you for reading and if you have any views, comments or trading inquiries then please get in touch using my details below.

Intended for the clients of Blue Nile Trading Ltd.

General disclosures:
This research is for our clients only. Other than disclosures relating to Blue Nile Trading Limited, this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst’s judgment.