Guar Seed Prices below 5000 – Will the Downward Trend Continue?

Guar seed and Guar gum futures had ended with light gains last week, but the futures market constantly faced difficulty in moving upwards for the entire week.  Improving production prospects has been weighed over the markets. Guar sowing area as on 1st Aug '22 was up by 94% at 29.39 Lakh hectares as compared to 15.17 Lakh hectare previous year same period. These are the official figures released by the Rajasthan Ministry of Agriculture.

The rainfall has improved in the month of July and as per market reports, the field crops in the sown areas have received adequate rains to date. If the rainfall is normal during this month then the crop prospects will improve further.

Guar seed is one of the major Kharif commercial crops of Rajasthan. The state contributes around 80% to the total domestic crop. Guar seed and its derivatives - Guar gum is mainly used in oil exploration industries. Guar gum is obtained from the grounded endosperm of the guar crop, and Rajasthan contributes nearly 72% of the world’s guar production. Guar gum is used largely in food and industrial applications.

Guar seed prices had made a comfortable breakout above the 5000 barrier in August 2021, and had even crossed the 7000 level, before reversing the trend. Between 2019 and the first half of 2021, the commodity had traded within the 3700-4600 range, and the demand scenario improved in the second half of  2021, against limited supply availability, due to which the new highs were established. Prices are surfacing near 4800 levels in the present term.

The inventory is running limited due to improvement in the guar gum exports over the previous year, and the local demand situation is stable. With prices getting cheaper, exports of guar gum will be keen for fresh business.

Crude oil prices have gone below the 100 dollar mark which will be another encouraging factor for the export prospects. Guar gum has a wider usage in the US drilling industry. India dominates the guar gum industry, commanding about 80 per cent of global production. Guar gum is mostly exported to North America, Russia, China, Mexico and Brazil. Under the given scenario we expect demand for guar seed and its products to improve in forthcoming weeks so there is less room for any sharp fall in the prices this month.

Market sources say that the spot offers are unlikely to go below the 4500 level in the month of August and if local/export demand picks up then one can expect a price appreciation of at least Rs.400-500/qtl from the current rates.