Tuesday, 12 July 2016

Estimated Guar seed production, Carry over stock and availability of guar seed for this financial Year 2016-2017

Will guar seed drop down lower than INR 2982 or move higher than INR 4200 ?

After the strong forward position in Future market Guar prices hit high   and crossed 3300/100Kg. Guar seed is regularly under pressure after the harvesting of fresh crop. At the starting of harvesting guar seed prices were trading at 4200/100 Kg on 12th October 2015, after that guar seed started to fall regularly due to excess production and low consumption. Falling crude prices hit if double strike.

Within two months on 14/12/2015 guar reached down to 3100/100 Kg. from that level it started to gain and on 04/01/2016 guar reached INR 3425/100 Kg. From that level it again started to go down and on 02/03/2016 it reached to lowest level of last four year at INR 2982/100 Kg. It recovered form that level and it reached to INR 3557/100Kg on 25th April 2016 and it again started to fell down and dropped to INR 3100/100Kg on 21/06/2016.

Guar seed is moving between INR 2982/100Kg to INR 4200/100Kg. Now Guar seed has two directions lower than 2982 and upper than 4200. There are three major factors which will decide the rate of Guar those are Production of Guar , Holding of Guar and Consumption of Guar.

Production of Guar 

Guar is major Kharif crop in Guar growing belt, which is grown in long geographical area from Haryana to Gujarat in a single belt.  This year production area is expected to drop down to 10, 00,000 hectare, which was 55, 81,216 Hectare in Year 2015-2016. 47, 86,781 Hectare area was in Rajasthan and rest of around 8, 00,000 hectare area was from other states like Punjab, Haryana and Gujarat.  This year other states Guar cultivation area will be below 1,00,000 Hectare and from Rajasthan it will be around 9,00,000 Hectare. Total Guar cultivation area will remain around 10,00,000 Hectare, which is 20 % of last year production. Around 80% sowing has done in this pattern.   In any situation guar production will not cross 15,00,000 Hectare.

As per above figure total Guar seed production will be 5, 00,000 MT (50 Lac Bags). Last year guar seed production was 27,51,423 MT (2.75 Crore Bags), as per traders it was only 2 Crore Bags. Around 3,60,000 MT Guar gum has been exported last year, means  around 10,80,000 MT Guar seed has been processed only for export purpose. IF we add 30% for domestic purpose then total 15,00,000 MT Guar seed has been processed or 1.5Crore Bags has been processed. 16,000 MT guar seed has been used for sowing. Generally there is 18 %-20% moisture at the time of harvesting it reached up to 10-12% in one year. 6% average moisture loss of total weight that will be around 1,65,085 MT moisture loss. There is another 5 % loss of sand, plant parts, low quality and domestic use by farmer, that is 1,37,571 MT guar seed. total carry forward for this production year  it is 12,32,768 MT or 1.23 Crore Bags It is in very loose condition as per Govt data of production. If there is 2 Crore bags guar seed production instead of 2.75 Crore then carry forward will be only 50 Lac Bags.

As per market men/ traders this figure is not more than 7,50,000 MT guar seed in market including last carry forward. At maximum side only 7,50,000 MT (75 Lac bags) of Guar seed is lying with farmers/ traders/ stockist/ factories.

Total Availability of Guar seed for  this  financial year and up to next production arrival ( Total one year and Six month up October 2018) will be 1,73,27,670 Bags or 17,32,676 MT ( 1,23,27,670 Bags: current Carry forward  50,00,00 Bags : Current year expected production).


Availability of guar seed   from last production Year 2015-2016
Consumption of guar in last Financial Year 2015-2016
( 2015-16 year)
Guar Seed for Sowing   ( this year)
(10,00,000 hectare)

Moisture loss 6% on current production

Farmer use, low quality, plant parts and other 5% on production

Holding of commodity
/ Carry forward


Over supply  from last production cycle for this Year- 12,32,767 MT (more than 1.23 Crore Bags)

2016-2017 (If demand and Crude rate remains same)

Availability of guar seed from this production  Year 2016-2017
Consumption of guar in this Financial Year 2016-2017 and next 6 month up production 2017- October
( one year + 6 month)
( 2016-17 year)
Guar Seed for swoing   ( next year)
(20,00,000 hectare)

Moisture loss + Farmer use + low quality 5% on total

Holding of commodity


Deficiency /supply shortage of guar seed up to next production cycle- 5,35,871 MT (Around 53.5 Lac  Bags)

Above calculations are as per current demand of Guar gum and Current crude rates. If demand increases and rates goes up then holding of commodity will increase in market.  In normal supply condition there is scarcity of 10,00,000 Bags If rates goes up  then holding will increase and  There will be scarcity of 1,00,00,000 Bags for Guar gum processingindustry.

(Finical Year- April to March; Guar production & guar consumption Cycle - October to September)

Holding of Guar 

Due to high prices of pulses and extra monitoring by govt and expectation of good return in Guar market will hold more Guar than this year.  Especially in western part of Rajasthan Guar is a cash crop and farmers keep it  hold for their financial needs. In the news of low production traders and stockist and speculator will also hold a good quantity of commodity from market.  For next financial year there will holding of same amount of commodity as this year.  With increasing prices situation of supply can be tighter and farmers will hold more commodity. There will holding of Guar seed from 50, 00,000 to 1, 00,000 MT.  For next year at current demand and crude price there will be no carry forward for next to next year- 2017-18. In 2016-17 all the seeds will be used and scarcity of 5,35,871 MT of Guar seeds. If we assume that market will hold 10,00,000 MT seeds then there is scarcity or short supply of 1.5 Crore bags for Guar gum processing industries for this financial year and up to next production in October -2017 .

In normal condition consumption can be assumed as current year guar gum seed production 15,00,000 MT April -2016 to March 2017 and 7,50,000 Mt up to next guar production up to October 2017. Total guar seed consumption will be around 21,50,000 MT up to next production.  If demand from Churi Korma industry remain same then it may reach up to 25,00,000 MT and If demand from oil and Natural Gas industry also increases then there will consumption of 30,00,000 MT for 18 Months.  Crude will not remain below 50 USD/ barrel for next 15 months. Guar Churi & Guar Korma industry will also give good boost for the consumption of Guar seed .

Production, Demand and Consumption are at lower side in current situation. Production can’t be increase up to Next 15 Months till October 2017. Meanwhile demand and consumption will increase then Guar will again reach in Year 2012 movement and rates of guar will sky rock. Guar seed will reach up to 5000/100Kg in current sluggish condition and it may cross 10,000 in good condition.  Side by side speculators, stockist and future contract will also affect Guar prices. Processing capacity of guar gum processing industry will also increase. Some closed plant will also start to work. Positions can be made for next 12- 15 Months Guar will give good return it can be somewhere 100 to 200 %.  From 20th July 2016 onward Guar will never move toward INR 2982/100 Kg even in worst conditions.

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