Spices and Sesame seeds: “The markets remain vulnerable”

Which were the main difficulties faced by the sesame seed and spice markets in 2024? What has changed compared to the last two years?

The trade of Indian sesame seeds and spices faced a plethora of peaks and troughs in the year 2024. There were two main obstacles for Indian sesame seeds, one is high pricing and the other is increased freight costs. Further, there are several changes which have affected trade to a higher extent.

Global Competition & Polarization:

The monopoly of hulling and sorting facilities of India is coming to an end as the days are passing. For instance, the third world nations like Tanzania and Nigeria are installing the latest infrastructure for hulling and sorting of sesame seeds. Hence, these nations are giving cut-throat competition to India.

Also, if we zoom the global buying pattern then a clear polarization is seen, either there is demand for the superior quality or for the lowest grade, the mediocre category is losing the position in the trade.

Considering the median of all South Korean tenders of the whole year of 2024, India could still maintain the share of more than 45%. Out of the total tender quantity of 48,500 mt, India was able to secure 22,130 mt. If we observe the buying trend, India was only given preference in two circumstances: short supply and increased freights, transit time, due to the geopolitical scenario.

Change In Export Dynamics:

As far as the export volume is concerned, India is witnessing a steep negative curve by 12%. To conclude, there has been some important changes in the market of sesame seeds and spices, the above parameters will still continue to affect the trade in the upcoming years. India will not have any huge demand as per previous years, as globally many players will be competing.

With several global political tensions, the war between Russia and Ukraine and the import tariffs on Russian agricultural commodities for shipments to Europe significantly increasing, will this also have an impact on the sesame seed and spice markets?

Considering the political tensions between Russia and Ukraine, Europe has imposed import tariffs on Russian commodities. This will ultimately spill the pressure to other nations, as Russia will reduce the price and try to enter the untouched nations. Particularly considering the sesame seed trade, this will not have any major impact, as Russia is not a major produce of sesame seeds and imports from other nations.

Whereas the spice trade, specifically coriander, will have a deeper influence. Russia is already offering much lower prices than big markets like India. Hence, if the tensions still persist in the near future, then coriander prices will keep on getting suppressed globally. The European market is becoming tougher day by day, the recent rejections of the Indian spices due to ethylene oxide contamination has already constricted the supply of spices. Adding to the complexity, if Russian corianders enter Indian ground with higher magnitude, then prices will confront a declining phase for at least eight to ten months.

Therefore, with the bird’s-eye view, a price appreciation of Russian commodities seems difficult as long as the war situation persists.

In 2024, climate change and its impact on global commodity production was once again a major issue. How should growers and market players act to be prepared for the coming years?

The globe has witnessed severe floods in many countries, also heat waves have caused damages to yields. Considering the global commodity production, 70 to 80% of the commodities are now being grown in many countries. So, any natural calamity in one or two nations will not disturb the trade.

However, if some specific commodity like turmeric is taken into consideration, then tables can turn overnight. As 80% of the global turmeric production is cultivated in India, any climatic change can deviate the market to a higher extent. For instance, in July 2023, turmeric prices jumped by 70 to 80% due to news of yield damage.

For the growers, it is better to upgrade their knowledge regularly and the latest technology should be implemented, to safeguard their efforts to some extent. Also, governments can ensure safety by issuing insurance to farmers. Whereas market players can save their position by maintaining timely stocks of crops, as recent geopolitical situations have brought irrational volatility in the ocean freights as well.

Once again commodity prices have risen significantly in many markets, some being at all- time highs or close to. Inflation and higher production costs are leaving their mark; the spice and sesame seed markets is no exception here. Do you think consumers will look for cheaper alternatives in the long run?

Inflation and Production Costs: Throughout 2024, inflation and higher production costs significantly influenced the Indian sesame seed and spice markets. Here's how:

Rising Input Costs: Beginning notably in March 2024, the cost of agricultural inputs such as fertilizers, pesticides and labour increased due to inflation. This trend continued throughout the year, directly increasing the cost of cultivation and reducing profit margins for farmers, especially in key producing states like Gujarat and Rajasthan.

Supply Constraints: The reduction in cultivation area, particularly noted in January and exacerbated by April 2024 due to environmental factors like water scarcity and unseasonal rainfall, led to tighter domestic supply. This was compounded by production challenges, including crop damage from heavy rainfall, contributing to a volatile pricing environment and higher market prices.

Consumer Price Sensitivity: As prices continued to rise, starting to become notably impactful by June 2024, there was a shift in consumer demand towards cheaper alternatives. This trend suggests that in the long run, consumers might increasingly look for substitutes, especially if high prices persist and alternatives become more economically viable.

Global Trade: The higher domestic prices made Indian sesame seeds less competitive internationally, particularly noticeable by September 2024. With African producers offering similar or superior products at lower prices, India’s export market share was challenged, reinforcing the possibility that global buyers might also turn to these alternatives.

Looking at the current market situation, what challenges might the sesame seed and spice market face in the 2025/2026 season?

Looking ahead to the 2025/2026 season, the Indian sesame seed and spice markets may face several challenges:

Environmental and Climatic Risks: The climatic unpredictability observed in 2024, especially with monsoon variability impacting both the quantity and quality of crops, is likely to continue. This poses significant risks for crop failures or reduced yields, affecting supply stability.

Economic Vulnerability: The markets remain vulnerable to global economic conditions, including inflation rates and currency fluctuations. These factors could influence import and export dynamics, potentially leading to increased prices and supply chain disruptions, as observed with significant impacts by August 2024.

Competitive Pressures: As seen from mid-2024, countries like Sudan and Nigeria enhanced their production capabilities. If these nations continue to improve their agricultural output and maintain lower production costs, they could pose serious competitive threats to India’s market share in the international arena.

Regulatory and Policy Changes: Potential changes in government policies regarding agricultural subsidies, export-import regulations, or environmental guidelines will play a crucial role. Any new policies could either pose challenges or provide opportunities, depending on their nature and implementation.

Consumer Shifts: There's an ongoing trend towards alternative products due to high prices. If this trend solidifies, it could reshape market dynamics, potentially reducing the demand for traditional sesame products in favour of more cost-effective substitutes.