Low exports, record sowing paints bearish signs for Gua

Traditionally, guar is grown for animal feed, fodder and vegetable, have now become one of the most important cash crops. The importance of guar increased over the years, as its products viz. guar gum and guar splits are widely used in food, cosmetics, printing, pharmaceutical and textile industries.

Guar gum has unique binding, thickening and emulsifying property, which made it much-sought product in the international market. Moreover, fracking and drilling industries now extensively use guar gum for oil and shale gas extraction in United States, China, Canada and Russia as it is environment-friendly biodegradable product.

India is the largest producer of guar and contributes about 80 percent of total guar production in the world. The crop is cultivated mainly on rainfed and marginal lands in the states of Rajasthan, Haryana and Gujarat during Kharif season in India with estimated production 25 – 30 lakh tonnes.

The guar seed prices have touched all-time high of over Rs 30,000 per quintal during March 2012 due to the fracking boom in the US for shale gas extraction. This year, guar seed prices in physical market have hit their lowest level of Rs 3,500 per quintal for the first time since June 2011.

Guar prices mainly moves on forecast and progress of the monsoon, planting area in Rajasthan, international crude oil prices and export demand for guar products from drilling companies, food and textile industries.

Price Performance

In the last one year, the prices of guar gum and guar seed dropped by 43 per cent and 30 per cent respectively as export demand falls significantly after February 2015 as fracking (to release oil and gas from rock ) demand for guar gum declined from US.

In 2015, guar prices have been quite volatile as it has touch 5 years low two times – one in March and then recently in August. In the first quarter (Jan-Mar), guar prices decline due to lower exports of guar products as crude oil prices dropped in International market. During this period, the crude oil prices dropped about 16.5 per cent to $ 44 per barrel from $ 52.70 in January.

Moreover, the guar gum prices on National Commodities and Derivatives Exchange (NCDEX) have tanked about 31.3 per cent to Rs 8,430 per quintal from Rs. 12,270 levels prevailing in January. Similarly, guar seed slipped 22.3 per cent to Rs 3,758 per quintal from Rs 4,600 levels.

During the second quarter (Apr-Jun), the guar prices have surged and reached higher levels in April due to aggressive buying by the stockists on reports of deficient monsoon rains in coming kharif season due to El Nino effect. Comparatively higher exports than the corresponding previous year and lower production estimate in Rajasthan and Gujarat supplemented price surge.

In April, guar gum price surge to Rs. 12,820 from Rs. 8,700 levels and closed at Rs 11,800 levels while guar seed, touched high of Rs. 5,278 from Rs 3,826 to close at Rs. 4,950. Thus, guar gum and guar seed prices increased by 35.8 per cent 27.4 percent in April.

However, during May and June, guar prices slipped about 10-11 percent due to good sowing progress in Rajasthan on above normal monsoon rains.