Guar seed market loses its charm in 2020 – Trade persons, farmers eager for optimistic news as business prospects improve

It has been a dismal story for Guar producers as well as persons associated with its business. Guar prices were already negative affected in 2019 by weak demand from global markets, and in 2020 the ongoing COVID-19 pandemic made the situation even worse for the Guar seed industry.

Demand from the oil rig companies where usage of guar gum to extract oil is higher, halted. World markets had turned sluggish mainly because of a slump in demand from the largest buyer, the US, and reduced application in shale oil fracking due to lower crude prices. Gur gum, a processed product of Guar seed, has a higher export demand due to its utility in the Crude Oil Industry.

India enjoys the leading position in production as well as export of this product in the world market. Approximately 80 % of global demand is contributed by India. Xanthan gum is a common additive found in everything from cosmetics to ice cream, and acts as a thickening agent, binder, as well as emulsifier.  

Guar seed production over the year has dropped considerably in recent years as farmers preferred sowing in pulses and oilseeds because of good prices prevailing in both. Guar or cluster bean (sometimes clusterbean) (Cyamopsis tetragonoloba (syn. C. psoralioides), Fabaceae) is an annual legume plant that grows in semiarid regions. Guar is drought-tolerant and can be eaten green like snap beans, fed to cattle or used as a green manure. Guargum is obtained from the grounded endosperm of the Guar crop.

Guar gum is used largely in food and industrial applications. Basically Guar is a short duration crop and mainly rainfed, therefore requiring no irrigation, and cultivated in Rajasthan & Haryana state mainly. Rajasthan contributes nearly 72% of world’s guar production.  

The Trade tensions between the US and China in 2019 and 2020 continued eventually creating an adverse impact on crude oil prices, ultimately pushing down oil drilling activities in the US. As such the Guar seed trade situation turned discouraging for the Indians in terms of exports, as well as generation of better returns for the farmers and industry or trade persons. The trade environment in Guar and Guar products was quite healthy till 2018-2019, and the market has been negatively affected since then. 

Guargum exports to European Union and Russia continue but the quantity has not been that significant till now. However the year 2021 looks promising for Farmers and the entire Guar Seed industry in terms of getting better prices as business prospects turn better. In a recent development, the Saudi pledge and the upside price movement in Crude oil is expected to offer the U.S. shale industry some scope to scale up their market share, though financial hardships from the pandemic and investor expectations remain obstacles. 

Since the export demand possibility of Guargum from the US shale drillers has increased, the market participants i.e. Farmers, traders, stockists, and processors will be keen over fresh reports on this front. The processed product of Guargum i.e. Churi and Korma which are required quite frequently by the feed industry will be another positive price driver for Guar. Guar meal i.e. Churi and Korma one of the best protein ingredients for animal feeds, and a processed product of guar gum. 

Already sown area is dropping in last two years and inventory has also fallen in 2019-2020 (5 Lakh tonnes approximately) versus 2017-2018 and 2018-2019 (around 9-10 lakh tonnes during these two years). This will be favoring the chances of price appreciation in near term, in case the exports especially from the US pick up. The price levels are quite cheaper at present - be it export offers or the mandi prices. In all, there are bright chances of earning good returns by the growers and other segment of the value chain of guar complex. Therefore people now wait for fresh reports or news on the export front, or on improvement in the domestic demand situation, so as to decide their future course of action in guar/guar gum/guar meal trading.