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Increased seed arrivals due to a bumper summer harvest in Gujarat have led to a 16 per cent fall in guar prices in the last three weeks.
Guar seed for delivery in June declined to Rs 8,030 a quintal today, against Rs 9,640 a quintal during the launch of the contracts on May 14. Guar gum for delivery in June fell 15.33 per cent to Rs 24,640 a quintal, against Rs 29,100 a quintal three weeks ago. Yesterday, contracts of both the commodities had hit the lower circuit on the National Commodity & Derivatives Exchange (NCDEX).
Trading in these two commodities is under continuous supervision of the Forward Markets Commission (FMC) and the ministry of consumer affairs. In March 2012, FMC had discontinued futures trading in guar contracts, following price manipulation by several trader groups across the country.
"Currently, there is no bullish or bearish activity in guar counters. The current price fall is purely based on fundamentals. While seed price fell because of excessive supplies, gum faced irregular export orders," said Purushottam Isaria, president of the All India Guargum Manufacturers Association.
Guar seed arrivals in spot mandis have risen to 40,000-50,000 bags (of 100 kg each) in the last two-three weeks, owing to a bumper summer crop in Gujarat. Farmers in other states, including Rajasthan and Haryana, have also started releasing last year's stock, amid expectations of a favourable monsoon and a bumper winter crop. A trader said this year, the summer guar seed output in Gujarat rose to 20,000 tonnes, compared with 15,000 tonnes last year.
In the absence of a benchmark price, farmers held about half their annual output, planning to sell at higher prices. However, after they saw no further room for a price rise, they started releasing excessive quantities, ahead of the sowing season in June.
While sowing of the winter harvest crop begins in June in most states, in Rajasthan it commences in July.
Isaria said farmers were optimistic of a 25 per cent higher acreage and a proportionate rise in guar seed output this season. He estimates this year's guar seed output at 25-27.5 million bags, against 20-21 million bags last year.
Purushottam Mundra, a Jodhpur-based trader, believes guar gum is being imported by the US on a cautious note. Instead of one-time bulk orders in the previous years, importers have started ordering small quantities.
In the spot market, the demand for guar gum remained robust - at about a five per cent premium over the prevailing price on the NCDEX. Against the current price of Rs 246 a kg on NCDEX, traders are booking the guar derivative for Rs 252 a kg to ensure delivery.
The movement of guar prices would depend on the monsoon. In case of normal monsoon rains, the downward pressure would continue.
