Tuesday, 2 August 2016

Guar Gum demand will increase with falling Crude oil

Guar seed and Guar gum contract size has come down after down fall in last week. This is due to exit of some short term investors. Overall Guar seed is very strong in market. If there will be down fall then Guar seed is strong at down side and if there is upward movement there is more chances of return in guar gum.

People are calculating the increase in Guar cultivation area but at this time it is not a big reason to decide the gaur prices because right now Guar cultivation is increasing in inferior of less productive land. For the First 10,00,000 Hectare productivity will be around 500Kg /Hectare but for rest of cultivation area productivity will not cross 200Kg/Hectare.  At maximum side we can take 70,00,000 bags ( 100 Kg each )of guar seed production. 80,00,000 Bags will be a upper limit figure after all positive  factors.

In a growing market 20,00,000 Bags is not a big equation. For a medium level stockist have a capacity to hold 10,000 Bags of Guar. This over production is a game of 20 medium level stockists. If farmers and small stockist active at same time in market then it is negligible production to affect the prices.

All the stack holders are positive but there is fear of increase in cultivation area. Everyone is positive about Guar prices like processor, middle men, traders, farmers, and exporter. Oil exploration activities have not come down even in this low crude price period. Shale or tight oil production was 1 Million barrel per day in year 2012; it was 2 Million Barrel per day in 2013, 3 Million in 2014, 4.5 Million barrel/Day in 2015, 4.2 Million barrel/Day in 2016. There is no negative figure at Guar gum demand side. It is highly demanded product due  Oil and Natural Gas industry. If Crude oil prices are coming down it means the use of Guar gum is increasing. Industry should not take any tension Hyper competition in crude oil prices will be beneficial for Guar Gum industry. 

Low crude prices are due to competition in Soft crude oil production (Conventional  technology special used in Gulf –African and Old Soviet region)  and Hard crude oil production ( latest technology special in USA, Canada and some part in Russia ). Hold with current position for 6 month to 12 month target. It will give very good return among all the commodity from now.

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