Guar prices crash to 10-year low

Acreage likely to shrink 30% in the next season as farmers might shift to other crops

With guar gum prices sliding, many processing units have shut down in the past three months. Farmers, too, are wary to grow guar in the upcoming season with seed prices falling to 10-year lows. As a result, acreage is expected to shrink 20-30 per cent in the next season.

At present, guar seeds prices are between Rs 3,500 and Rs 3,700 a quintal - which was the price band in 2004.

On the other hand, guar gum prices are between Rs 8,500 and Rs 8,700 a quintal compared with Rs 14,000 in the year-ago period. During the peak of the guar gum boom around March 2012, gum prices had touched Rs 90,000 a quintal.

In the current financial year, exports of gum have fallen by almost half. During the April-January period of FY15, exports fell to 600,000 tonnes with a large part of the fall happening in the past couple of months. Exports are expected to fall much sharply in the coming months.

With the fresh guar gum produce expected to come in the market by June, guar seed prices are further expected to fall to Rs 3,000 a quintal, according to Ganesh Prajapat, a guar gum analyst. While 95 per cent of the guar is harvested around September-October, a small amount is harvested around May. In 2005, guar gum was discovered to be a cheap substitute for other expensive ingredients needed for shale gas exploration in the US. The shale gas boom led to a demand surge for guar gum. However, with crude prices falling, shale gas exploration has been curtailed, leading to a drastic fall in the demand for guar gum.

The demand of guar gum in the domestic food processing and textiles industry has kept a few processing units open. Many have either shut down or are in the process of stopping operations.

“The market for guar gum is very bad, and 90 per cent of the units are not running. The arrival of guar seed has come down from 20,000 tonnes a day to nearly 400-500 tonnes a day. As a result, farmers are not interested in growing fresh guar this season,” said Suman Jain, owner, Vasundhara Gums and Chemicals.

According to a survey by Agriwatch, the total guar acreage this year is expected to come down by 20 per cent. In 2014, the total production of guar seed was estimated to be 3.4 million tonnes, or 34 million bags.

“We have conducted a small survey in Gujarat, which pointed out that at the current price level, farmers are not interested in growing guar. They find crops such as moong dal more profitable. As a result, we expect the guar acreage to come down by at least 20 per cent,” said Chandramonhan Jain, senior research analyst, Agriwatch.