Guar seed prices spurt sharply on crop damage

Seed prices rose from nearly Rs. 3,700-4,000 per quintal about a month ago to Rs 5,000-5,200 per quintal at present

Unseasonal rain and hail, followed by predictions of a weak monsoon this year, have led to a 40 per cent rise in guar seed prices through the past month. Traders say there has been no significant increase in exports during this period, adding prices had shot up due to fear of a lower crop.

They say seed prices have risen from Rs 3,700-4,000 a quintal about a month ago to Rs 5,000-5,200 a quintal at various spot mandis. “The price increase is purely on the basis of speculation, as there are predictions of a weak monsoon. There is near stagnation in demand in the US market,” said B D Agarwal, chairman and managing director, Vikas WSP, one of the largest guar gum manufacturers in India.

Though export volumes rose 20 per cent in April-February 2014-15 compared to the year-ago period, realisation in dollar terms fell 15 per cent.

Even as guar prices rise, sowing of the commodity is yet to begin in Rajasthan, the largest producer in India. The sowing season in that state is June-July, while the crop is harvested in September-November. An early crop, which accounts for about five per cent of the production, comes from Gujarat by the end of May.

“Ahead of the new arrival, supply of the tradable commodity has been falling, which speculators have used to jack up prices,” said Ganesh Prajapat, a guar gum analyst.

“Both farmers and traders expect higher prices. The prices could go up to Rs 5,550 a quintal by the end of May. After that, prices could stabilise on account of the arrival of the new crop from Gujarat,” said Jinesh Dugar, a guar gum trader in Rajasthan.

This time, owing to poor demand, about 90 per cent of guar gum processing units have shut. Through the past few years, several companies have opened local warehouses in Houston, US. Agarwal says about 2,000 containers or 40,000 tonnes of unsold guar gum is in warehouses in the US. He adds Vikas WSP alone has about 10 containers in a warehouse in the US.

According to government estimates, guar seed production stood at 3.4 million tonnes (mt) in 2014-15. However, traders say actual production didn’t exceed two mt.

This year, the carryover guar seed stock from last year is 1.2-1.5 mt, about one mt more than last year.

Demand for guar gum is linked to oil prices. Higher the oil price, higher is the demand for guargum, which is used for exploration of shale gas, a substitute for high cost imported oil in the US.

"Till the time oil prices go up to $70-75/ barrel, and stabilize at $80-90/ barrel, it is difficult for demand for guar to pick up," said Agarwal.