The market for guar seed and gum is back in fancy and estimated to move up on higher exports, analysts have said. India is the largest producer of guar gum which is used in the shale gas industry in the process of hydraulic fracturing. Guar seed prices declined to the lowest level in five years in 2016 after the shale gas producers in US lowered imports as the industry suffered due to lower oil prices. “The prices have started to recover steeply from February on good export demand based on increased demand for the guar gum as oil rig count in US is seen increasing after US President Donald Trump emphasised on boosting the country’s energy sector.
The weather forecast too affects the guar complex prices. There is a possibility of a new El Niño event forming later this year as per scientists from the World Meteorological Organization (WMO). They have also predicted neutral conditions later this year but there is also a 40% chance of a new El Niño forming which will affect monsoons in Asia ,” Ritesh Kumar Sahu of broking firm Angel Broking said.
Moreover, higher exports during the first three quarters of FY 2016-17 are also supporting the prices, he added.
Guar seed was quoted Rs 3470.8 per quintal at the spot market counter of NCDEX on Thursday evening, while guar gum was seen higher at Rs 7201.75 per quintal.
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Angel reports that in the current season, the prices of guar complex were at lowest levels in November 2016. Since then, the prices of guar gum have recovered about 25% while guar seed increased by 9.5%.
Another analyst pointed out that production of guar seeds has come down in the country as farmers switched to pulses and edible oil as returns dwindled.
Derivatives of guar gum are used in several industries, including textiles, pharmaceuticals, and food processing and oil extraction. But it was because of shale gas that India’s exports of guar gum increased fetching good returns to Indian farmers.
Guar is a rain-fed crop, sown in July-August and harvested in October-November. Being a leguminous crop, guar fixes nitrogen, making the soil fertile.
According to the Agricultural and Processed Food Products Export Development Authority (APEDA), India exported 3, 25,250.71 tonne of guar gum to worth R3,233.87 crores during the year 2015-16.
Market participants are expecting that the export demand for guar gum will be higher during first and second quarter of 2017. However, in case of guar seed, the excess stocks with farmers and millers might put pressure at higher levels.