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Guargum prices : on the surge

The guar seed futures contract on the National Commodity and Derivatives Exchange (NCDEX) made a low of Rs.3,494 a quintal. The strong spot market demand coupled with increasing export demand for guar gum has pushed the prices of the seeds sharply higher.

Chander Mohan

A commonly used Guarseeds came into the picture at the beginning of the year in January 2018 when the National Commodity and Derivatives Exchange Ltd (NCDEX) unveiled India’s first agricultural-commodity options in Guarseed designed as a hedge for farmers to safeguard against price risks. It was launched by Union Finance Minister Arun Jaitley in New Delhi. 

NCDEX’s guaranteed option is one of the most liquid contracts on the exchange platform. Its three options contracts in guar seed will expire in February, March and April 2018 and will be made available for trading. NCDEX is the second exchange after MCX to launch options trading in commodities. In October 2017, MCX had launched gold options. Market regulator SEBI had allowed NCDEX to launch options in September 2016 and later had clarified that options will have futures as underlying for settlement.

Guar gum is very good agriculture crop. Guar gum is beneficial at every stage, green stage is used as green manure, Green pods of Guar gum are is used as vegetable, Guar gum Seeds is used as cattle concentrate. We provide complete solution for Guar gum and Guar gum seed cultivation and guar gum seed processing, with complete market intelligence and product information. We have provided our services in many countries.

Options are derivatives which give a buyer right but not obligation to buy or sell an underlying asset or instrument at specific price on or before a  certain date. The option trading is powerful tool to hedge price risks and will boost the development of agri-commodity market. It is considered as one of major steps towards taking farmers out of situation resulting in drastic fall in prices of some agri-commodities due to higher production. This initiative will benefit farmers and ensure better prices for their produce in the coming days.

Guar gum seed is an industrial crop. Guar seed is processed into guar split and guar splits are further processed into Guar gum powder. Guar gum powder is used in various industries. Guar gum has various food applications. Guar gum is used as a viscosity agent. Guar gum is also used as a stabilizer. Guar gum is widely used in sauces, ketchup, juices, ice cream, biscuits, Gluten-free cooking and many more. Guar gum is used in the printing industry as moisture retention in Ink. Guar gum is used in paper industry. Guar gum is used in the textile industry.

Guar gum is also used in cosmetic items, shampoo, moisturizers, liquid shop, lipsticks and many more. Guar gum is also used in the pharmaceuticals industry as a binding agent, viscosity agent. Guar gum is also used as dietary fibers. Guar gum used in fish and meat industry. The major application of guar gum is in oil and natural gas industry. Guar gum is used as drilling chemical in Oil and Natural Gas Industry. Around 60 percent demand of Guar gum arises from oil and Natural Gas Industry.

Guarseed prices have been on a strong surge over the last several weeks. The guarseed futures contract on the National Commodity and Derivatives Exchange (NCDEX) made a low of Rs.3,494 a quintal on June 5 and had reversed sharply higher from there. The contract has skyrocketed over 27 percent from the low of Rs.3,494 and is currently trading at Rs.4,447/quintal.

The strong spot market demand coupled with increasing export demand for guar gum has pushed the prices of the seeds sharply higher.

The current uptrend, which has been in place since June, is likely to remain intact. Indicators on the charts are also bullish. The 21-day moving average has crossed over the 55-, 100- and 200-day moving averages. This is a strong bullish signal indicating that the downside is limited, and the current uptrend is likely to continue in the coming days.

An immediate support is at Rs.4,350, which is likely to limit the downside in the near term. A strong short-term support is at Rs.4,200. A strong fall breaking below Rs.4,200 is unlikely at the moment.

Resistance is at Rs.4,560, which is likely to be tested in the near term. Inability to breach this hurdle can trigger an intermediate dip to Rs.4,400 or Rs.4,375. However, the overall bullish outlook will remain intact. An eventual break above Rs.4,560 will boost the bullish momentum. Such a break will then increase the likelihood of the contract rallying to Rs.4,800 and Rs.4,850 over the medium-term.

Medium-term traders can go long at current levels and also accumulate at Rs.4,385. A stop-loss can be placed at Rs.4,250 for the target of Rs.4,800. Revise the stop-loss higher to Rs.4,495 as soon as the contract moves up to Rs.4,520.

All India average monthly prices for guar seed increased by 14.71 percent from Rs 3170.10 in June to Rs 3636.50 per qtl in July-2018. Average price (July) is higher by 7.41 percent compared to Rs 3385.68 per qtl (June-2017).

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