Guar prices rise 70% on potentially high demand

Guar prices have started rising again, due to the onset of the lean supply season and the potential of renewed demand from the US.

Guar seeds for near-month delivery on the National Commodity & Derivatives Exchange (NCDEX) surged 72 per cent to close at Rs 7,210 a quintal on Saturday, after hitting a low of Rs 4,180 a quintal on August 1.

Similarly, guar gum for delivery in October closed at Rs 19,910 a quintal on Saturday, a rise of 70 per cent from Rs 11,740 a quintal on August 1.

Both contracts have hit the upper circuit intermittently on NCDEX, with the Forward Markets Commission, the commodity derivatives markets regulator, suspending lean season contracts on the futures platform. The trend followed in the spot market, too.

Spot prices of guar seed have risen 65 per cent in the past month, according to data at the National Multi Commodity Exchange.

In the beginning of August, the spot price of guar seed was close to Rs 5,000 a quintal, which has risen to Rs 8,275 a quintal at present, the data reveals.

Such a sharp rise has not been seen in recent times, after US energy companies curtailed fresh purchases due to a high inventory since the beginning of this year. Spot prices of guar gum have been at less than Rs 5,000 a quintal since January this year.  While a section of traders believe that the sudden price rise has been due to the possibility of crop damage, others see punters rigging the prices.

India’s guar seed production has fluctuated between one and 1.7 million tonnes (mt) in recent years. India’s guar production in 2012-13 was estimated at 1.7- 2 mt, according to MCX data.

“It is possibly due to speculation that guar prices are rising. There are reports of lower rainfall in parts of Rajasthan, but this year, the guar acreage has risen by 25 to 30 per cent. While it is early to predict this year’s crop size, there are expectations that it would be normal. We expect guar prices should not sustain above Rs 7,200-7,300 a quintal,” said Santosh Jhanwar, vice-president, consulting, Agriwatch.

At present, daily guar seed arrival in the Jodhpur mandi is less by 60 per cent, at close to 6,000 bags (Rs 100 kg each) a day, against the normal arrival of 15,000-20,000 bags a day.

“This year, there has been a shortage of guar seeds. Some speculators have spread the rumour that the guar crop has been destroyed. We believe, even with less rain, the crop size should be close to 10.50 million bags, more than last year’s production of 10 million bags. Demand is also muted, so there is no reason that prices should rise,” said Suman Jain, owner, Vasundhara Gums & Chemicals.

“There is no reason for such an abrupt rise in guar prices, as the demand is still muted and most US shale gas companies have enough stock for the next five to six months,” said Ganesh Prajapat, agri-business consultant.

On the other hand, a powerful farmers’ lobby in Rajasthan, the Deenbandhu Chotu Kisan Samiti, led by guar merchant B D Agarwal, has been advertising in newspapers that this year, guar seed production could be down by 25 per cent, which would lead to further price rise.   

“I expect guar seed prices to cross Rs 10,000 a quintal, for a reasonable price of the commodity, given the international demand. It was due to price manipulation that prices had fallen below Rs 5,000 a quintal,” said Agarwal.