Will guar seed and guar gum prices keep falling ?

Guar seed and Guar gum prices are going down and down regularly. Guar gum prices are affected poorly. Prices OF Guar gum has fallen below the level of Rs 7500/100 Kg and Guar seed has fallen below the level of Rs 3600/100Kg. The situation is worrying to Guar seed and Guar gum investors, exporters and farmers. This Year Guar was started to Trade above 3500/100Kg level and once it reached near to 4900/100Kg level.

This year Production of Guar seed was lower than the previous year, the demand for Guar gum is higher than previous production cycle. Export Guar gum is also higher than the previous year, currently, the arrival of Guar seed is also poor. All the fundamental factors for guar business are positive. After that Guar seed and Guar gum prices are falling regularly. 

Meanwhile, some news is spread to justify the Guar seed and Guar gum prices downfall that supply of slick water chemical has increased as slickwater chemicals are cheaper than Guar gum. But it is not true, as the percentage of Guar gum / slick water chemical is total chemical is very low, that doesn’t make any difference at the current price level. As per news that supply of slick water chemical is at lower prices than Guar gum, even after this news India is exporting 30000 MT Guar gum per month. There is no change in demand due to slick water chemicals or any other alternates.

Another news is spread that Monsoon is Normal. At the Initial stage, normal monsoon prediction doesn’t make any difference as the sowing of Guar seed keeps going up to the first week of August month. In the case of poor rainfall, it may affect but if predictions are normal than it doesn’t make any difference at the current time. As the new crop production cycle will start after 5 Months. The demand for Guar gum increasing regularly. 

New Guar seed harvest will come in market in the month of November. Still, there are 5 months to go with the current stock of Guar seed, to complete the export demand. No one knows the production of Guar seed in next production cycle. Still, there is the demand of 60-80 lac bags of Guar seed in next 5-6 Months. This year MSP of Kharif pulses are also high. Guar seed is not supported under MSP. Farmer will prefer to go for other Kharif pulses over Guar seed due to higher MSP. Cultivation area of Guar seed will shrink as MSP of other pulses are higher and current price level of Guar seed is also low. If current price level will remain low for two months then it is good for Guar seed and Guar gum prices in future.

Generally, NCDEX works as price discovery and hedging tool for Guar seed and Guar gum. For next three months, there is no contract in NCDEX Guar seed and Guar gum. There are possibilities that Prices may respond to actual arrival in the market. Actual arrival of Guar seed in the market is very low at this time. Oil drilling rig counts are increasing in USA and Canada and that is the major positive factor. Increasing drilling activities will lead to higher demand for Guar gum powder. 

Guar seed and Guar gum prices are strong in the local physical markets. Prices of Guar seed and Guar gum are quoted higher than Commodity exchanges. Future trading of Guar seed and Guar gum is also expected to remain low with selling pressure at upper levels. Good quality of guar seed is traded at Rs 3600/100Kg and average quality guar seed is traded at Rs 3500/100 Kg. Standard quality guar gum is traded at Rs 7600/100 kg. In interior location, guar seed is traded up to 3400/100 Kg. guar seed is being traded strongly in the future market. At NCDEX (National Commodity & Derivatives Exchange Ltd) guar seed-10MT is traded at Rs 3579, 3637, 3788 higher by 0.48 percent or INR 17/100 Kg, 0.43 percent or INR 15.5/100 Kg, 1.32 per cent or INR 49.5/100 Kg with open interest of 37670, 71580, 3680 for June July and October month contracts.

Guar gum is also traded strong in the future market. At NCDEX (National Commodity & Derivatives Exchange Ltd) Guar gum- 5MT is traded at Rs 7436, 7531, 7840 higher by 1.33 percent or Rs 98/100Kg, 1.33 percent or Rs 99/100, 1.3 percent or Rs 101/100 with an open interest of 13940, 50400, 1110 for June , July and October month contracts.

Are slick water chemicals, major reason behind Guar seed and guar gum price fall ?

Prices of Guar seed and guar gum is falling during its peak demand and tight supply period. Many reasons are given behind the price fall of Guar seed and guar gum. One reason is saying that production of Guar seed is increasing. Another reason is given that there supply of substitutes of guar gum at lesser price exported from China. Both the reasons seem completely wrong for falling price of Guar seed and guar gum. As the arrival of Guar seed starts from the month of November and by the month of January there is peak arrival time. This is May month right now so it can’t be justified that arrival of Guar seed has increased after six months of harvesting. Since Guar seed is grown only in India and it is grown only in one season so there is no reason to justify that arrival or production has increased in mid-season.

Another reason is given that China is supplying slick water chemical at half price of guar gum. This justification is also wrong. Slick water is not new chemical this technology is as old as guar gum. Slick water is not a substitute for guar gum. Guar gum has some specific quality which can’t be substitute by slick water. Slick water chemical in not cheaper than guar gum. Slick water chemicals cost more than 2000 USD/MT. Where is Guar is being exported at 1300-1500 USD/MT.

Since crude prices are increasing so demand for guar gum is also increasing. Export data of guar gum until this time is positive. All the fundamentals of Guar seed and guar gum business are positive. Speculative trends are damaging the Guar seed and guar gum industry. Guar seed and guar gum traders/farmers must avoid distress selling of Guar seed and guar gum under price fall pressure. Distress selling will put more pressure on current falling prices of Guar seed and guar gum. USA has put it out from the nuclear deal with IRAN. That will lead to sanctions against IRAN. There will be the tight supply of crude oil in the global market. With increasing crude oil prices USA will increase the production of crude oil. US crude oil supply will fill the vacuum due to Iranian oil. 

Guar seed and Guar gum prices are strong in the local physical markets. Prices of Guar seed and Guar gum are quoted higher than Commodity exchanges. Future trading of Guar seed and Guar gum are strong with increasing export demand and crude oil price. Good quality of guar seed is traded at Rs 3950/100Kg and average quality guar seed is traded at Rs 3800/100 Kg. Standard quality guar gum is traded at Rs 8250/100 kg. In interior location, guar seed is traded up to 3700/100 Kg. Guar seed is being traded strongly in the future market. At NCDEX (National Commodity & Derivatives Exchange Ltd) guar seed-10MT is being traded at Rs 3752, 3814, 3865 higher by 1 percent or INR 37/100 Kg, 0.73 percent or INR 27.5/100 Kg, 0.7 percent or INR 27/100 Kg with open interest of 7760, 91490, 12560 for May, June and July month contracts.

Guar gum is also being traded high in the future market. At NCDEX (National Commodity & Derivatives Exchange Ltd) Guar gum- 5MT is being traded at Rs 8284, 8367, 8470 higher by 0.44 percent or Rs 36/100Kg, 0.6 percent or Rs 50/100, 0.62 percent or Rs 52/100 with an open interest of 2750, 57470, 1675 for May, June and July month contracts.

Guar seed and Guar gum prices are decreasing despite rig count is increasing.

During these two weeks, there was a steep downfall in Guar seed and Guar gum prices. There were two lower circuits in NCDEX in last week,. Due to the downfall in prices of Guar seed and Guar gum, there is fear among all the stack holders and whole Guar seed and Guar gum Industry. As per market man arrival of Guar seed and Guar gum is the physical market is almost nil. Oil drilling companies in US has added 11 new rigs in this week. As per data released by Baker Hughes, there is the addition of 9 active oil rigs, 1 active gas rig and 1 miscellaneous rig in existing rig count.

Crude oil prices are increasing slowly and slowly and stabilizing above USD70/barrel. WTI crude oil is being traded above USD 69.72/barrel and Brent crude oil is being traded above USD 74.87/barrel. It is expected that prices will increase further. Guar gum export data of previous fiscal year were released by APEDA in last week of April. These export data of Guar gum are also positive. Export of Guar gum has increased in both monetary and quantity terms.

Prices of Guar seed and Guar gum is moving downward due to speculative trading in NCDEX (National Commodity & Derivatives Exchange Ltd). Due to speculative trading, small investors in Guar seed and Guar gum of NCDEX (National Commodity & Derivatives Exchange Ltd) were moved out with loss by to continuous hitting of stop loss targets. 4000 level of Guar seed was considered as the lower side. Prices of Guar seed hit with the lower circuit. Subsequently, on next day there was another lower circuit hit. 

As per market men availability of Guar seed and Guar gum is very limited. Due to the shortage of Guar seed in market speculators are heavily active in the market. They want to capture Guar seed and Guar gum market at lower prices, that’s why this sudden downfall movement seems very speculative. Marketman doesn’t see any fundamental reason behind the steep downfall in prices of Guar seed and Guar gum. 

Oil prices will gain further as OPEC will cut down oil production to move the oil prices upside toward USD 100/barrel. If the prices of crude oil go up then fracking activities will increase in the USA and other countries. Currently, USA is the major importer of Indian Guar gum powder. There are chances that prices of Guar seed and Guar gum will move upside with increasing crude oil prices and increasing drilling activities. 

Guar seed and Guar gum prices are strong in the local physical markets. Prices of Guar seed and Guar gum are quoted higher than Commodity exchanges. Future trading of Guar seed and Guar gum is also expected to be strong with increasing export demand and crude oil price. Good quality of guar seed is traded at Rs 3900/100Kg and average quality guar seed is traded at Rs 3750/100 Kg. Standard quality guar gum is traded at Rs 8200/100 kg. In interior location, guar seed is traded up to 3700/100 Kg. guar seed is being traded weak in the future market. At NCDEX (National Commodity & Derivatives Exchange Ltd) guar seed-10MT was closed at Rs 3725, 3786, 3832 lower by 1.29 percent or INR 48.5/100 Kg, 1.05 percent or INR 40/100 Kg, 2.26 percent or INR 88.5/100 Kg with open interest of 66700, 67250, 9180 for May, June and July month contracts.

Guar gum was also closed low in the future market. At NCDEX (National Commodity & Derivatives Exchange Ltd) Guar gum- 5MT was closed at Rs 8188, 8302, 8395 lower by 1.90 percent or Rs 90/100Kg, 0.88 percent or Rs 74/100, 1.62 percent or Rs 138/100 with an open interest of 20155, 45270, 400 for May, June and July month contracts.

Guar Gum Export from India is increasing continuously

Guar gum is major export farm commodity from India. It is produced after processing of Gaur seed. India produces more than 85 % Guar Seed of the world. Normally there is 27% - 30% recovery of guar gum split from Guar seed. Guar Gum splits are further processed into guar gum powder. If we analyze the data of guar seed export of last eight years. In the Year 2017-18, there was the export of 4,49,126 MT of guar gum. Guar gum export It is increasing continuously since last three years. This year there was fourth highest export in last eight years. Most of Guar gum powder is used is oil and Natural Gas industry as drilling chemical/ ingredient.

Guar Gum Export Quantity (MT) From India (2010 to 2017)

Oil prices are continuously recovering from last fiscal year. Currently, prices of crude oil are maintaining its level above USD 70 /barrel. That is good for Indian Guar gum industry as this level will attract more investment to oil exploration sector. Drilling activities are regularly increasing in USA. The demand for Guar gum will increase with increasing drilling activities in the USA. USA is the major destination for Indian Gaur Gum powder.

Guar Gum Export from India in year 2017-2018 was 4,94126 MT

As per primary data released by APEDA, 494126 MT of Guar gum was exported during last fiscal year from April-2017 to March-2018. Value of exported guar gum is 647 Million USD or 4170 Crore Indian Rupees. Guar gum is major farm export commodity form India. 

During the last fiscal year, there was the export of 419952 MT of Guar gum during the period from April 2016 to March 2017. Value of exported Guar gum for the period from April 2016 to March 2017 was 463 Million USD or 3107 Crore Indian Rupees.

This year (2017-2018) there is an increase of 74,174 MT in the export quantity of Guar gum in comparison to last year (20016-2017) or 17 % increase in export quantity. This year (2017-2018) there is the increase of 184 Million in the value of exported Guar gum in comparison to last year (20016-2017) or 39 % increase in export value in USD. In Indian rupees this year (2017-2018) there is the increase of 1063 Crore rupees in the value of exported Guar gum in comparison to last year (20016-2017) or 34 % increase in export value in Indian rupees. This year (2017-2018) there is the increase of 206 USD/MT in the rate of exported Guar gum in comparison to last year (20016-2017) or 18.63 % increase in the rate of exported Guar gum (USD/MT).

During the month March– 2018 there was an export of 44,417 MT of Guar gum. Value of exported Guar gum during March-18 is 50 Million USD or 457 Crore Indian Rupees. During month March 2018 Guar gum was exported at the rate of 1575 USD/MT or approximately INR100/Kg. During February-2018 Guar gum was exported at the rate of 1497 USD/MT or approximately INR 95/Kg.

Data are very positive for rest of period of the current budget year. After the analysis, it was found that all the figures are positive. If the exports, go on at the current rate then there will export of 3,20,000 MT Guar gum in next 8 Months. There will further requirement of around 11,00,000 MT of Guar seed for export purpose. There will also the requirement of 20,000 MT for Guar seed sowing purpose. There will be total requirement of 13,00,000 MT of Guar seed up to the arrival of the New crop. As per one estimate, 6,00,000 MT Guar seed has been after arrival from the new crop. In the current Guar seed production cycle (November-17- October-18) there is the tentative demand of 20,00,000 of MT of Guar seed as per market men there was the production of 9,00,000 MT of Guar seed in the current production cycle. The shortfall is expected to complete with carryover stock. But the supply of Guar seed will be remaining very tight for rest of period.

Crude oil prices are increasing, and demand for guar gum powder is expected to increase. If the demand for guar gum powder will increase, then the gap between supply and demand will increase further. Guar is major drilling chemical used in fracking technology for crude oil exploration from the shale formation. The USA is producing more crude oil to increase its global market share in crude oil export.