NEW DELHI: Guar gum, which set the futures market on fire a year ago, faces headwinds in the international market. Shipments of India's top agri-export commodity halved in the April-May period this year from a year ago as demand from oil and gas exploration companies has slowed down, say companies. Futures prices have remained lacklustre, worrying farmers and traders.
The July guar gum contract on the National Commodity and Derivatives Exchange ( NCDEX) was down 2.14% at 21,460 a quintal with an open interest of 2,801 lots at 3:45 pm on Monday. Guar seed for the July contract edged down by 1.72% to Rs 7,440 per quintal, with an open interest of Rs 7,358 lots on the exchange.
According to the provisional figures of the Directorate general of Foreign Trade (DGFT), guar gum exports fell 56.22% in value terms in April-May of 2013 compared to April-May of 2012.
"Guar gum exports have fallen by 20-30% in terms of volume in the past few months. Current high prices are not attracting buyers in the export market," said Sudhir Merchant, former chairman, Shellac and Forests Products Export Promotion Council (Shefexil), a nodal agency which promotes guar gum exports. He said demand by major US companies such as Halliburton, Economy Polymers and Chemicals and Chemplex was expected only if guar gum prices were in the range of Rs 16,000- Rs 20,000 a quintal.
"Everyone is going for a short-term contract and conversion margins are reducing by 50-60%," said Merchant, who is the chairman of Encore Natural Polymers.
The crop, cultivated in the arid regions of Rajasthan, is the leading agriculture export commodity from India. In March 2012, guar gum prices rose to a record Rs 95,920 per quintal from Rs 13,600 in October 2011.
Traders who had never seen guar gum prices topping Rs 5,000-Rs 6,000 a quintal till 2011 made a quick buck last year when prices skyrocketed. Current spot market prices are around Rs 21,000- Rs 22,000 a quintal.
"Oil and gas exploration companies abroad are now adopting waterless fracturing where guar consumption is nil. This has led to negligible orders for Indian companies," said Guar Gum Manufacturers' Association president Purushottam Hisaria. He said guar was still the best bet for farmers because guar prices were far more remunerative than cotton and soya bean.
The industry expects guar acreage to increase 20-25% from the previous year's area of 30 lakh hectare. Guar acreage is expected to go up in non-traditional growing states such as Maharashtra, Tamil Nadu, Uttar Pradesh, Madhya Pradesh and Andhra Pradesh this year. "People will grow guar as it requires very less pesticide and fertiliser," said Merchant.
Guar seed production touched 23 lakh tonne in 2012 with industry analysts expecting farmers and traders to hold more than 50-60% of the crop. "Till June, guar seed consumption is no more than 8 lakh tonne," said a leading player into guar gum manufacturing in Jodhpur.
Biren Vakil, CEO, Paradigm Commodity Advisors, an Ahmedabad-based commodity derivative specialized firm, said guar seed and gum prices have remained volatile. "In the past fortnight, we have seen prices fall by more than 25%. Market dynamics will keep varying with changes in weather conditions," he said.
Some traders said sentiments will be weak with the new smaller summer crop in Ganganagar and Hanumangarh entering the market after August. The bigger crop will be harvested by November. "Around 2,000 tonne of guar seed is coming to the Jodhpur market daily according to local demand. Prices are likely to remain stable," said Jai Prakash Saraswat, owner of Dalal Shakti trading company at Jodhpur.
Source:-economictimes.indiatimes.com
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