Rising prices put sesame seed exporters in a spot

Over 80-90% of sesame produced in India is exported. The major export markets are Japan, the US and South Korea, among others

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The sharp increase in sesame seed prices owing to crop failure has put exporters in a tight spot. While most of them have made forward contracts at lower prices, they are now facing difficulty in meeting their export obligation as prices have almost doubled in the past few weeks.

According to insiders, over 80-90 per cent of sesame produced in India is exported. The major export markets are Japan, the US and South Korea, among others. Many exporters had booked forward contracts for exports in the beginning of the season, anticipating lower prices. However, extended and heavy rains in Gujarat and other growing regions have dampened the crop prospects, thereby pushing up the prices to hit an all-time-high of Rs 3,000-3,100 for 20 kg.

Trade sources revealed that till September this year, exporters have made about 20,000 tonnes of forward trading for November and December delivery on average price of Rs 1,800 (for 20 kg). However, heavy rains, mainly in Gujarat, have damaged the sesame seed crop, resulting in reduced production estimates.

“In such a situation, where exporters will have to make delivery at earlier contracted price, many of them will default. Prices have touched all-time-high, which exporters did not anticipate. So, they are now facing trouble,” said Biren Vakil, a commodity expert in Ahmedabad. This happens because exporters will have to buy seeds from the domestic market at a much higher price than at which they had contracted with the foreign buyers.

Exporters believe that forward contract has spelled trouble for them. According to an industry estimate, exporters may face huge losses if prices continue to stay high for the remaining months of November and December. Insiders maintained that some exporters may default in delivery because of huge price difference between the present spot price and that of the forward contract they did in September. If they default, that could mar their reputation in the international market.

A Gujarat-based sesame seed exporter said: “Once we have committed, we have to deliver weather we are in profit or loss. There is no chance for negotiation on pricing. This time exporter might be in loss but it is not new thing for us.”

“It is difficult to ascertain the exact quantum of loss exporters may face. Presently, there is no monitoring system on sesame seed export’s forward trading. But a sharp price rise would surely put sesame seed exporters in trouble,” said Kishor Tanna, chairman of Indian Oilseed and Produce Export Promotion Council.

He added that in case of any default in delivery by the exporters, if a buyer complaints to the government or IOPEPC, then only can the council know.

Recently, sesame seed prices have come down to Rs 2,800-2,900 per 20 kg owing to low demand because of high prices. At present, the daily arrival of sesame in Gujarat is 15,000-17,000 bags (of 50 kg each), while the India figure is 40,000 bags.