Demonetization and Indian Guar Gum Industry

Prime Minister Nagendra Modi came with scheme of demonetization of Rs 500 and Rs 1000 currency notes to eradicate the parallel economy. This parallel economy consists the corruption, black money, illegal trading, terrorism, narcotics, and other anti-social and criminal activities. This is a very good step for the country in short term and long term. In short term, it will break down the existing chain of parallel economy immediately and in long term size of Indian economy will grow.

Indian Guar gum industry is facing problem of speculations and illegal trading due to black economy. Every honest stack holder is facing problem in Indian Gaur gum industry from farmers to exporters. They don’t know what will be next move in their business. In the morning prices goes up sharply and in the evening prices goes down drastically. A lot of black money has invested in trading, stocking of Gaur seed. These greedy traders/stockist/ exporters gives the movement to prices as per their profit. 

Guar farmers and Demonetization.

Farmers is the first point of guar trade. He produces guar seed with expectations of good prices but at the time of harvesting he could not able to recover his cost of cultivation. How is it possible? When farmer carry his produce in the market greedy stockist increase the parallel supply of seed in market and farmer is forced to sell his guar at lower prices. If there will be no black money, then it will not be possible to increase the parallel supply and farmer will get the real value of his produce. 

At the time of guar crop sowing these illegal traders / stockist increases the demand and farmers are forced to buy guar seed at higher prices. 

Some traders procure guar seed parallel by offering the extra payment and ditching the local mandi taxes. This farm incomes remain hidden. After demonetization, parallel buying will stop and funds will be transferred to farmer’s account after paying the mandi taxes. Transactions will be transparent. It is noticed if farmers ask for transparent transactions then these traders deduct the mandi taxes from the farmers’ payment. 

Sometime traders don’t give payment on time. Some traders don’t give sale slips to farmers, it becomes very problematic for farmers to prove the source of their income to banks to get the loans. Traders purchases commodity with 30 % payment and rest of payment is made after 20-30 Days or more.

Traders purchase commodities from farmers at the time of low prices/ over supply but these traders show this buying at the time of high prices to minimize their profit or to show the losses. By the paying the 2% Mandi taxes they by passes the income taxes.  The income of local agriculture market doesn’t increase and marketing infrastructure is not developed. These transactions will be come in accounts and farmer income will be documented and farmers can get more loan from banks. Credit worthiness of farmers will increase slowly and slowly. Farmers will easily  get loan for other activities like personal loans, home loan, vehicle loans, entrepreneur loans, education loan. 

Income of local agriculture market will increase and Govt can develop more market infrastructure. Farmers will benefit from it. Sometime farmers produce destroys due to poor infrastructure specially in the rainfall. Sometime buying of agriculture commodities is shown in another state. Mandi income & economic opportunities moves to another state.  This trend can be seen in Rajasthan at the boarder of Haryana and Gujarat.

Guar Traders and Demonetization.

Honest traders face many problems due to black economy some time they can’t get enough margin due to surrounding black economy. Local traders of guar growing area keep waiting for arrival. Commodities reaches to another market by passing the local economy and traders. Black money comes from another market and it destroy the business of local traders. Local employment, trading, stocking, processing, tax earning move to another location.

Black economy also lead to circular trading. In the circular trading business of local traders is affected negatively. Traders are forced to buy the commodities at higher prices. These circular traders withdraw draw their investments, swap the profit, and dump the commodities in market. Sometime this back money doesn’t let the prices goes up even in low productions even the fix costs of commodities trading keep increasing. 

After demonetization transactions will come in account books and no one can enter with white money in this way. Investment of traders will be secure and their margin and profit will be secure.  They can generate more income with local value addition related to grading, ware housing. processing and transportation.

Guar seed processors.

Existing guar processors faces a lot of problem with black money. Sometime new processors enter in market with black money and started to work with loss or zero margin and it affects the trade of existing processors. They started to offer finished products with lower prices than purchase prices of guar seeds. Income generation cycles of existing honest processors break down and it require extra cost to start there processing or keep it running.

After a certain time, these greedy processors started adulteration and decrease quality of product and it draw negative picture of the local processors in international market. Sometime complete consignment faces problem due to one or two containers. Sometime raw material is swap from the market with black money and supply of raw material becomes very tight it effects the margin of processors.

These greedy processors also disturb trained human resources by offering them higher packages and more facilities for short term. Existing processors faces a lot of problem with vacuum of trained employees. After demonetization, existing processors will get raw material locally and they can plan for long term sustainable profits/margins. 

At this times guar processing activities is focused in three four locations in India it will diversify with availability of the raw material.  Processors can invest in R& D in guar products. There will be no fear of the sudden loss in business.

Commodities exchanges

Commodity exchange were established to provide fair business activities platform to farmers, traders, and exporters but black economy promotes the Dubba Trading / Illegal commodity exchange. Dubba trading influence the physical market.  Sometimes operators of these illegal exchanges create artificial situations of the oversupply and shortage to draw their profit. Prices become unstable in real exchanges investors makes a lot of losses.

Guar gum Exporters

Sometimes new exporters enter in market with back money and start to export of guar gum at lower prices than market prices. It cut down the margins of existing honest exporters. Sometimes these types of exporters open another company in importing nation and keep exporting material at lower prices. They earn margin in importing country it forces to existing local exporters to export the commodity at no margin or loss. Buyer base of existing customers also shift to new exporters.  Generally, exporters get long term orders but with these practices buyers starter to give small orders as material is available in importing country with cash and carry system.

In conclusion guar gum industry, a lot of speculations and prices keep fluctuating regularly. With small influence of black money complete industry is facing the problem. Demonetization will eradicate the black money and activities related to illegal trading, hoarding, adulteration will come down and complete industry will come in profit.  All the stack holders of guar industry will benefit from the demonetization. It will lead to long term sustainable profitable margins.

Guar Prices will remain under pressure during next 10-15 Days

Business activities are sluggish there is poor demand due to on-going Diwali celebrations. Arrival is also low in markets there is no more supply pressure. Most of business activities like arrival, transportation, processing and export will be muted. Business activities will be resume after 3rd November. Crude oil prices are under pressure. These are trading below USD 50/barrel.

Processing activities will be remained low during next 10-15 Days. There is arrival of 65000 Bags per day. Arrival is not increasing due to lower production. Over all business activities will be remained slow during next 8-10 Days. There will supply pressure and impact of poor demand.

Will bubble of Guar boom or blast ?

Guar cropping cycle for this year has almost completed. Crop has been harvested and most threshing has been completed remaining will be completed in this month.  Next supply will come in October-2017.  Demand for next 12 months will be completed from existing stock and current arrival.  

Crop Cultivation.

Over all crop cultivation conditions were poor for guar cultivation. The first rainfall covered only few patches in rain fed area of Haryana & Hanumangarh, Churu, Jhnjhanun and Sikar. At that time prices of kharif pulses were high and farmers were preferring only pulses like Moong and Moth over the guar crop. In these area guars was cultivation only 5 % of total sowing area. It was just 20 % of Last year crop. This crop developed very well and it was the early crop of Guar.

Next arrival of rainfall covered other parts of Guar growing area excluding Barmer, and Jaisalmer. By this time prices of pulses were high and farmers were still preferring pulses crops over Guar crop. Guar was cultivated just 30% of last year. This crop did not get the enough cultivation conditions and crop is poor in comparison to Last year except Ganaganagar due to irrigated cultivation conditions.

Some patched of Guar growing belt were still waiting for Guar specially in Barmer, Jodhpur and Jaisalmer area. By the End of August there was rainfall in these areas. Farmers preferred Guar over other crop due natural growing conditions in these area and low investment. With increasing cultivation area of pulses, prices started to come down and it reached in the range of Guar. Rainfall was very good and there was continuous rainfall for 6-7 Days. Farmers started the cultivation of Guar but rainfall pattern was uneven. Crop did not get the second rainfall in most of area. And around 60-65% crop was damaged. Productivity of rest of crop is very low around 50 Kg-100 Kg/ Hectare.

This year over all cultivation of Guar was on 20,00,000 hectares in Rajasthan and Total cultivation of Guar was not more than 25,00,000 hectares in India including Haryana and Gujarat. Overall production is expected to remain below 400Kg/Hectare as most of cultivation area was under rain fed condition and crop was damaged on large area in this belt.  Even in Haryana, major cultivation area was limited to rain-fed area.

As per primary estimate by keeping all the factor in view, overall production of Guar will be remaining around 80,00,000 Bags. Thus, production side of guar is in favour boom. Crop is poor.

Current market activities:

Arrival of guar is at its peak. Generally, by these days’ arrival reaches up to 100000-125000 Bags per day but it is not crossing 65,000 Bags per day. It is showing the actual availability of commodity with farmer. In the market traders are buying guar at Rs 3300-3400/100Kg. But in interior location small traders are buying at Rs 3100-3200/100Kg and supplying to stockist. Speculators are active and they are buying full-fledged. 

Group of traders are active in market and putting the pressure on guar prices so that it should remain low and they pick the material at lower prices.  Prices are not moving more than Rs 3600/100kg but it is also not falling below the 3200/100Kg even in this peak arrival. As per marketmen prices will improve but it will improve once the material will come out from the hands of Traders and farmers. Now processors and exporters want to stock at lower prices. Farmers and Traders want to sell at higher prices.

Demand of Guar is poor now but it is improving that’s good for guar industry. In international market, crude oil prices are improving and it is maintaining current level above USD50/barrel. Oil rigs count is also increasing. Korma prices are high and at lower side it is giving support to Guar seed prices. Except the regular demand there will be demand of Guar seed and seed for next cropping season. Next week is expected to remain sluggish for business activities. As there are holidays for 5-6 Days. 

Most of processing industries remained closed and labor and employs goes on holidays and they will return on first week on November. Arrival will go down in November and supply will become tight in comparison to the demand. Major arrival from irrigated area will be very low. Good quality material comes from the irrigated belt. As per marketmen availability of material below 3500 is good for investment for next 6-12 Months and Guar will give good return from these levels. Guar is still strong commodity in comparison to other Kharif commodities specially in Guar growing belt.

Guar remained stable even arrival is increasing

Guar remained stable but it dropped at weekend with increased arrival. In this week Guar remained around 3500.  Arrival of Guar seed in increasing from guar producing belt. Market is in buying mode and prices are stabilising at current level.  There is also additional pressure of contract settlement in October month. 

Maturity of crop.

Crop has matured in most of area and farmers are harvesting it. No rainfall has noticed and that is good for crop drying and maturity. Harvesting has completed in irrigated belt. Farmers in rain fed belt are still harvesting manually. Before Diwlai most of harvest will be completed and cropping cycle will finish. Arrival will keep increase up to Diwali and it will remain peak arrival up to 15th November.

Stocking

Stocking activity has  started with the increased arrival and it will keep going full-fledged up to December. 50 % of arrival is coming markets for selling and 50% material is diverting to stockist through small village level traders. This year estimated production of Guar is around 80 Lac bags.  40 -50 Bags bags of material will be stocked up to November. Current prices of Guar are good for long term stocking for 6-12 months. There is no any major chances of prices fall. 

Crude oil is improving

Crude oil is maintaining its level above USD50/ barrel. It is good for Guar industry. A long term stability will give support to Guar gum prices.  Guar gum prices will further give support to guar seed prices.

Estimate of crop

As per information coming from different sources. Estimate of guar crop will remain below 1 Crore ( 10 Million)  bags this year. A tentative estimate is coming around 80,00,000 Lac ( 8 Million)  bags. Total Guar gum industry will depend on this arrival up to October 2017. Since It is a monopoly crop of India and there is no any other source of guar production globally except small portion from Pakistan. 

End of October contract in NCDEX.

October contract will finish on 20th October and there will be some settlement pressure on Guar prices with increased arrival in physical market. Its will settle between 3400-3500 level. 

Price movement.  

Physical arrival has increased in market and there will be some pressure on prices but due to low production and strong buying prices will remain stable around current level of 3400/100Kg.  With peak arrival prices will remain around the current level.  Prices of crude will give further support to the guar gum prices. 

There are no any chances of Major gain before Diwali. After Diwali arrival will slow down and prices will move upward. If all the factors remain positive, then November contract will settle around 4000 /100Kg of more. It is good time and Good price for physical stock. There is also news of increase in export of Guar gum powder during last month.  

Guar seed and Guar gum lost its major recovery due to profit booking

Guar seed and guar gum kept moving upward and reached at very good level. Guar seed reached to 3800/100kg and guar gum reached to the level of 7250 with news crop damage due to water scarcity and return of Monsoon. At the mid of week profit book leaded to further down fall in prices. After the profit booking Guar seed dropped to the level of 3650/100Kg. Guar gum dropped to the level of 7050.

Rainfall started.

In the last of week, rainfall has noticed in scattered area in small– small patches.  In some belt halls storm has noticed.  There are two cluster of Guar first is early sown crop area and another is late crop sown area. If there is any rainfall in the late sown crop, then it is good but it is very dangerous in the early sowing crop.  Matured pod will pop up with force of wind.  If there is any precipitation, then mature crop will turn black. 

Crop Damage:

Late crop sown in rain fed area of Bikaner, Jodhpur, Barmer and Jaisalmenr has damaged on large level and there are no any chances of recovery. In some area of Barmer and Jaisalmer crop is delaying the flowing stage and it is growing vegetative. Crop has also damaged with halls and wind storm and a large level in productive area of Hanumangarh, Ganganagar and Haryana. Local farmers are asking administration for   assessment of loss and compensation. 

Disease and Insect Attack

Early crop has matured so there is no chances of disease and insect attack. But if there will rainfall and cloudy condition for 5-6 days then disease may outbreak in late sown crop area.

Stocking

Stockist are active in market and buying the new crop. Processors have fear if the crop production will remain low then they will have to buy the material at upper prices and it will bite their profit. Full-fledged stocking will start around 10th -15th October, when arrival will start from all the belts. As per market men once the demand will rise then stocking will consume most of material form market.

Crude oil is stabilising

Crude oil is keep moving between 40-50 USD/ barrel. No major improvement and downward movement has noticed.  Since last one year it is stabilising below 50 USD/ barrel.

Oil rigs are Increasing

This is a positive news for industry that oil rigs are increasing regularly.  Major guar gum is used in fresh drilling. It is good for Industry that demand of Gaur gum is improving in market.  Drilling companies are giving orders for long term supply some commission agent are creating problems and playing in market at minimum commission. Manufacturers must avoid the middle men so that prices could be negotiated directly with the end users.  

Estimate of crop

Estimate of crop is major puzzle in the Industry. With different view it is at different level. People who are in downtrend are estimating 3,00,00,000 Bags. Govt is estimating around 2,00,00,000 Bags. The person who are in upward trend are estimating around 50,00,000 Bags. As per independent sources crop is estimated around 80,00,000 - 90,00,000 Bags it is as per ground reality. People are worry about the carry over stock. Carry over stock is not a major issue as market can consume/stock around 2,00,00,000 Bags for long term if market is improving.

Fresh crop arrival

Arrival has start bull fledged arrival will start around the 10th October. Before this farmer will try to sell the existing stock. Generally, in fresh arrival three is 18-20% % moisture. It will take time to dry the fresh harvest for 10-15 Days and moisture will come around 15%. Generally, Guar is stored on 12% moisture. In one-year-old crop moisture is around 10-12% and farmers get good price in comparison to new crop.  One-year-old crop will come in market for processing and fresh crop will go to stocking. Arrival has started in Haryana and Hanumangarh due to rainfall it will again delay by 5-10 Days has mature crop will take another 10-15 days in drying. 

Price movement.  

It is a stable period. There are no any major chances of upward movement as there will pressure of physical arrival in markets. Prices will again reach to 4,000 level and time it will not move down. Stocking will increase with arrival and prices will not go down again.  There will stability in prices and at this time there is requirement of stability.  Once the 50 % arrival will complete then market will feel the low arrival and traders/ stockist will forced to increase the prices to collect more material. Arrival will also tight with increasing prices.

Guar has improved from lower level first it was stabilizing above 3100 level after it improved to 3300 level, after that its stabilized above 3500 level. Now it is stabilizing above 3600 level.  Next week is very important as existing contract will either settle of these will forward to next month contract.

Guar seed and Guar gum recovered after return of Monsoon

Guar seed and Guar gum recovered after water deficiency due to poor rainfall

Guar remain strong in this week after return of Monsoon. It started to move from 3550/100kg and one tiem it reached 3750/100kg. Guar gum also remained strong it started to move from 6500 and reached to 6900.Some local demand was noticed but major impact was from the factor of return of monsoon. Late sown crop will damage on large scale. 

Monsoon has Returned

No rainfall has noticed in Guar growing belt.  Monsoon has completely stopped. Climate is very Hot in Guar growing belt. There is no humidity in air. Dry air is blowing. Crop will dry within 10-15 Days. Initial rainfall was good but the second round and third round rainfall was very poor. Rainfall pattern was good for the early crop.  But for late sown crop patter was very bad and crop did not get even second rainfall after the sowing.

Crop Damage:

Rain fed area of Bikaner, Ganganagar, Jaisalmer, Barmer, Jodhpur is facing crop damage on large area. Around 40-50% crop will be damaged and rest crop produce will be of inferior quality. Major quality produce will come from Haryana, Hanumangarh, Churu and Some parts of Ganganagar. In these location there was early crop. Production Gujarat will be also poor. Only early sowing will be successful.

Disease and Insect Attack

No major disease and insect outbreak has noticed. This year disease outbreak conditions were not formed.  In the last stage it is dry climate and crop is safe from any major economic loss. 

Stocking

No major stocking activity has noticed but as per primary inputs of low production small traders have started to collect guar from the nearby area. As per market information stockist have dispersed some money to small traders for early collection of crop. Big processors are waiting for end of September and they will start from the arrival of crop.  In the First stage around 1,00,00,000 Bags will be stocked.

Crude oil is stabilising

Crude is major factor which will decide the further price movement. No major price improvement has noticed in crude oil but it is stabilizing. Within this production cycle Crude will take a major upward movement and Guar will grow with this.

Oil rigs are Increasing

It is good news that oil rigs are increasing in USA. Growing oil rigs will require drilling chemical and demand of guar gum will increase. It is very positive sign for industry.

Stock in USA.

Ready stock in USA has come down. Right now no stock is available in USA. Last year there was problem of ready stock in USA.  Now drilling companies will have to give the order for 6 month or 12-month supply. 

Crop Estimates 

Crop is estimates around 80 Lac bags after failure of crop in rainfed area. This year irrigated crop was very less. Early crop is in good condition but most of cultivation was started in August and August crop is late crop and all the late crop are facing water scarcity.  As per estimate crop will be remain around 75 Lac bags. There is no any chances of improvement in this figure. 

Arrival of Crop

Arrival of crop has been started in Haryana specially in Adampur and Sirasa area. It is noticed that stockist are purchasing the arrival. Arival will start in Hanumangarh and Ganganagar in Next week. By first week of October arrival will start in Churu and by the mid of October will arrival will start in rets of area.

Price movement

Though the current demand is low it moving due to crop damage and low rainfall. Current upward movement will work as bridge between Stocking activity and price movement due to low rainfall. Now the prices will not fall freely by the end of November. In next week some profit booking can be noticed but overall direction will be upward.

Guar seed and guar gum is moving upward with returning Monsoon

Monsoon has about to return with in one-two days. There is no rainfall in rain fed belt of Guar cultivation. There is more loss in late sowing crop. Late sowing crop is facing the heavy scarcity of water. Right now there are no chances of rainfall crop will damage on large scale. Farmers who opted gaur cultivation in last stage are facing the drought condition.

There can be some profit booking in short term but in long term guar will recover very fast. Arrival of gaur will depend on prices of Guar. It will be very hard for traders to source guar at current level. Stocking of guar will start with initial arrival and prices will go up. After the stocking prices will move with tight supply. Supply of Guar will be very tight up to next production in October - 2017.The opening of Gaur will again up in next week. Forward contract will give additional support to Guar.

Guar prices were down due to prediction of large cultivation; Production related predictions has been stopped now. Prices will move up with loss related predictions and conditions. Situation will clear by the end of September.

Guar seed and Guar Gum market is in buying mood

Market has come in buying mode. Prices are moving very fast in the forward market. Physical market is in selling position. More and more commodity is coming in market above 3500 level in fear of fresh arrival of crop after two months. All the stack holders in industry are denying the govt data of Guar cultivation. This weak is very critical for the growth of crop and growth of guar rates. If there will be no rainfall then crop will damage in large geographical area and production estimate will drop down to 40% of current estimates.

Guar is very sensitive commodity with respect to demand and supply. Due to long self-life of seeds and longer storage capacity farmers choose to sell guar as last option. This year Pulses will come in market first then Guar will come in market. In irrigated area, most of farmers sell the gaur to traders against the advance, which have given by traders on credit during cropping period. As per crop cycle this is not a demand period. Demand will start after December and January. The peak arrival period will start after 15 Days. Market will run after the December.

Guar seed and Guar gum recovered from lower level.

In the starting of week Guar seed and Guar gum declined to very low level. Guar gum reached to 6000 level and Gaur seed reached to 3300 level with lower circuits due to increased cultivation area and good rainfall. But it recovered from its declined level and sustained to last level of 3500/100Kg for Gaur seed and 6500/100Kg for Gaur gum powder. Market is getting some stability.  

Monsoon will be returning back

Rainfall has slow down. There is no news of fresh rainfall. As per weather prediction Monsoon soon will returning after 5th of September. There is no news of damaged on crop due to heavy rainfall in a large area.  Early sowing crop will not require another rainfall and it got rains on all the major critical stage of Sowing, crop development, flowering.  It is at pod formation stage and there is sufficient moisture for maturity and crop will start mature by last week of September and it will dry is October. At the last of October, it will ready for Harvest. For late sowing crop this is very critical stage. It will require another lot of rainfall for the crop development and flowering, if there will be no rainfall in next 15 Days then there will be crop damage in late sowing crop. The loss can be up to 40-50% on large area. 

Disease and Insect Attach

News of insect and pest attack has started to spot. There is news from Bikaner and Hnumanagrh area that leaf spot disease has started to emerge with growing temperature and moisture. If the prices of Guar will remain low, then investment on plant protection be low and crop production will be loss. Most of guar crop is repeated crop on same plot on guar cultivation area so there are more chances of disease outbreak. This year there is more humidity so there are more chances of disease attack.

Speculators are moving out from contract.

Last week and in this week there were continuous three lower circuits and most of people who were doing speculative trading has faced heavy loss. Some people made the selling positions at lower level they are also in fear.  Genuine investors are still stuck with their positions.  This week most of agriculture commodities were under selling pressure and there was huge loss to speculative trading. It will very hard for them to re-enter in this trade.

Sowing of Guar

As per data released by the different Govt. Sowing of Gaur has reached to 32,00,000 Hectare.  Right now no final figure has released. It expected that it may further improve. Rajasthan Govt released last data on was 22nd September,2016.  The final estimated data will be compiled after release of final figure by all state Govt of Rajasthan, Haryana and Gujarat. 

Demand is stable 

Export demand of Gaur gum powder is stable. Right now it is around 30000 MT/Month or 1000MT per day.  That is equal to processing of 3450 MT guar seed per day (with 29% gum recovery). In this way there is annual requirement of 12,50,000 MT of Guar seed. Which is 2,50,000 MT higher than current production of 10,00,000 MT of guar seed.

Crude is Volatile 

Crude oil is highly volatile at this time but is moving in between 40-50 USD/MT. It is expected that crude will improve by the end of this year. If crude improved more than 60 USD than it will give a support to Guar prices and guar may touch the level of 5000 or more.

Current movement

Prices will stabilize in next week. It will more toward 4000 level. With some news of crop damage prices will keep improving.  At lowest level 3000 level is stable. In normal business prices will keep moving around 3500 level. With some positive news prices will reach around 4000/100Kg in this Month.  We may see some fall in Churi Korma prices. Falling Churi Korma prices will lead to improvement in the Guar Gum prices.

Guar will emerge strong commodity this year due to lower cultivation area

Guar seed and Guar gum kept stuck to upper levels. Guar seed stuck the level of 3700/100Kg and Guar gum stuck the level of 6600/100 Kg e in sluggish business activities. Major business activities were sluggish due to regular holidays and close market but highly volatile trading was noticed.

Low cultivation area

Guar cultivation has almost stopped as per primary information Guar cultivation area will not cross figure of 30,00,000 hectares in whole India. As on 15^th August guar has been sown on 25,78,000 hectares in Rajasthan. It has been cultivated on 1,19,500 hectares in Gujarat as on 12^th August. It has been cultivated on 2,50,000 hectares in Haryana. Thus total cultivation area will be below 30,00,000 hectares. Thus the first strong fundamental is lowest cultivation area during last 7 years.

Production will be very low

In the first batch of sowing Guar cultivation area was very low it was far below than other kharif crop. In the first batch Guar could be cultivated only on 10,00,000 hectares. In best condition guar production average will be around 600 Kg/ Hectare thus there will be production of 60,00,000 bags from first batch. Crop will get good time in maturity and sufficient moisture in flower and seed formation. In second batch guar cultivation area started to improve and it reached up to 20,00,000 average productivity of second batch will be around 200Kg/ hectare. Thus there will be production of 20,00,000 Bags from the second batch. In the last batch rainfall covered the western part of Rajasthan and sowing area was added from Barmer, Jaisalmer and Jodhpur and it reached near to 30,00,000 hectares. In the last batch average productivity will be around 50 Kg/Hectare. There will production of 5,00,000 bags from last batch of sowing. As per primary estimate Guar production will be 85,00,000 Bags in good condition. In most favorable condition it may touch 1,00,00,000 Bags.

Crude is improving

Crude is life line of Guar gum industry and it get a strong physiological support from crude prices. In this week crude is getting upward movement. And it has crossed 50USD/ barrel. 50 USD /barrel is very strong fundamental support form guar seed and guar gum prices. There is major requirement of stability in crude prices above USD50 /barrel. OPEC is planning to cut the oil production to maintain the inventories in the line of demand.

Speculators are active

Speculators are active in industry in expectation of better return with improving crude prices. Speculators try to monetize every factor which is against the price improvement of guar seed and guar gum. This is time to play in grey/confused condition about production and sowing data. After one-sided condition they can’t enter in market and there is less possibility of market manipulation.

Profit booking at upper level in forward market

Ever upper circuit is leading to another lower circuit and downfall in prices. Short term investors are booking their profit at upper level and let the prices free fall. It is creating a negative movement for new investors and keeping them away from fresh investment. Though spot demand and supply is major factor which decides the prices of guar in market but processors are adopting hedging and effect of forward market reach quickly in spot market.

High volatility

As per discussion in above factor guar market is highly volatile at this time. There are two major factors behind the volatility first factor is sowing area. Guar crop is cultivated only one time in a year and this cultivation will decide the production and supply of guar seed for throughout the year. Many factor are intersecting each other and new theories related to sowing area is coming out every day. Speculators are promoting and encasing these theories. There will complete break on theories related to sowing guar after August. Some authentic figure will come in market by the end of August. Another factor is crude oil. Crude oil is highly volatile due to geopolitics and technology war. There is competition between soft oil and hard (shale) oil production. Increasing inventories of crude oil in marketing putting pressure on crude oil.  Every small and big decision related to production is leading to volatility in crude oil prices.

Current situation

At ground level all the stake holders related to guar which includes Farmer, Traders, Stockist, Processors, Exporter, end Users and Investors have got the primary inputs related to low production of guar and currently Guar is emerging as strongest commodity in comparison other commodities from guar growing belt. Bajara don’t have any major industrial application and it is not a long term investment friendly commodity. Another major segment is pulses. Pulses are already under heavy pressure of bumper production due to increased cultivation area. Third segment is oil seed. In guar growing belt oil seed in produced in large area in Rabi season specially the mustard. In this Kharif season some area is covered by groundnut but ground nut is a crop of excellent growing condition like timely watering and heavy investment in crop cultivation.  Last segment is cotton but cultivation time for cotton is totally different it is cultivated before June. Cotton is also cultivated in good soil and confirm availability of artificial irrigation water.

Crop stage

In guar growing belt early crop has started to flower. Flowering has started in lower branches with high temperature and upper branches are growing with increasing moisture.  Right now no major disease and pest attack has noticed in early crop and it is standing healthy in green condition. Late crop is growing and it is also standing healthy.  Moisture in climate in guar growing belt is not excessive.  Clod formation is not continued. If there will be 4-5 days’ continuous cloud formation, then attack of disease and pest will be start. In early stage there was attack of red hairy caterpillar in Haryana, Hanumangarh and Churu but now these insect has completed their caterpillar lifecycle.

Crop sown in very late stage specially in Jaisalmer and Barmer is facing the problem of moisture stress because there is no second lot of rainfall. After the germination there must be rainfall within 10-15 days. If this crop will not get this rainfall timely then there will loss of crop in very big area. But production point of view it is not an important belt. People go for guar cultivation due to lowest opportunity cost of land in this belt.

In short term Guar may cross the level of 4000/100Kg up to first week of September. But in long term investor may consider 5000/100 kg level up to November. At this stage guar need to cross a strong support of 4000/100 Kg level and sustain for one week. Investor must keep their existing position and they can consider to enter for long term investment for 6-12 months.