After crashing to multi-year low levels in March, guar prices have started bouncing back on anticipation of below-average monsoon and increased demand from the shale gas sector. Prices are expected to remain firm as they wait for subsequent monsoon predictions for further direction.
Guar seed prices in the National Commodity and Derivatives Exchange (NCDEX) have recovered more than 35 per cent to Rs 5,200 per quintal from Rs 3,600 per quintal in March. In case of guar gum, prices have surged 47 per cent to Rs 12,760 per quintal from Rs 8,690. Between October and March, guar seed and gum prices had dropped almost 38.4 per cent and 52.4 per cent, respectively, as the demand from the shale gas sector has been low, because of the subdued crude oil prices. Usually exports from the US pick up by October. But this year, as the guar prices were high at that time, the sector had also started looking for cheaper alternatives.
However, buying started picking up in March as guar prices came crashing down. More than 55 per cent guar gum produced in India is exported to the US for fracking purposes in shale gas drilling. China, Germany, Italy, Malaysia, Russia and Turkey are the other buyers of guar gum. India also exports food grade guar gum, which accounts for about 30-35 per cent of total guar shipment.
As exports picked up at low price levels, traders and stockists also started stocking up the commodity. The price surge in April was also due to the demand from traders. As the crude oil prices have recovered from their lows, traders expect that the demand from the shale gas sector will get better.
According to the data by APEDA, exports of guar gum from April to February stood at 6.63 lakh tonne, up 21 per cent from 5.45 lakh tonne exported last year. While the demand has been a trigger for price recovery, the concerns about production also supported prices. In case of a deficient monsoon, similar to other kharif crops, sowing will be lesser in guar too.
“After Indian meteorological department’s monsoon predictions, there have been speculations in the market that the next crop will be smaller as El Nino effect on the monsoon will result in lower sowing,” said Ritesh Kumar Sahu, analyst, agri-commodities, Angel Commodities. IMD in its first estimate has predicted below-average rains in 2015.
Guar is normally sown during the onset of monsoon around July and August and harvested during October and November. The crop requires good spells of rain during first and last week of September while the seed matures. Guar is grown mainly in arid districts of Rajasthan and depends heavily on the monsoon.
In 2014-15, guar production is estimated at around 20-22 lakh tonne, which is lower by about 18-20 per cent against last year’s production of 25-27 lakh tonne. In the past five years till 2013-14, guar production had grown three-fold. “Guar seed and guar gum prices are moving positively in last six weeks as supply has dwindled amid fear of lower production and good steady demand from food and textile industries apart from oil industries for drilling purpose,” said Sahu.
“We expect guar seed prices to sustain at the current level. Prices may consolidate in the range of Rs 5,300 per quintal and Rs 5,600 per quintal and wait for the monsoon for further direction. Similarly, guar gum may touch Rs 13,000 per quintal level in next one month depending on the demand for exports on dwindling supplies,” he added.
Source:mydigitalfc.com
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