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.