India's guar seed area to fall as shale gas producers' cut purchases

By Rajendra Jadhav

MUMBAI (Reuters) - The area under guar seed production in India, the biggest producer of the tiny seed used to extract shale gas in fracturing, could drop 20 percent in the coming sowing season due to falling global oil prices.

"Guar seed farmers are unhappy. They are likely to shift to pulses. We could see as high as 15-20 percent reduction in guar seed area," said K N Rahiman, chief research officer at Ruchi Soya, a leading guar gum exporter.

Guar seed prices have fallen to the lowest level in five years after the U.S. shale gas producers cut guar gum purchases due to lower oil prices.

Guar seed prices have fallen 41 percent in a year to 3,100 rupees per 100 kg, while the prices of pulses such as red gram have nearly doubled over the same period.

"At the current price guar is not profitable. Pulses, paddy are giving better returns," said Balbir Arniawali, a farmer from Sirsa district of northern state of Haryana.

Arniawali has not sold last year's harvest, hoping prices will recover, and has scaled back planting to 15 acres this year from 25 last year. Planting starts in June with the arrival of monsoon rains.

Guar gum is extracted from the seeds and used to thicken the slurry of water, sand and chemicals pumped into wells during the hydraulic fracturing, and tap oil and gas.

India, which produces 80 percent of the world's guar gum, saw exports from April to February fall 48 percent to 329,070 tonnes from a year ago.

The United States, whose shale gas surge has transformed it from the world's leading gas importer to a budding exporter, is the biggest importer of Indian guar gum.

More than half of India's guar gum processing plants are now closed and nearly half of the guar gum from last year's crop remains unsold, said a gum exporter based in Bikaner in north-western state of Rajasthan, the country's biggest producer.

(Reporting by Rajendra Jadhav; Editing by Michael Perry)