The Hindu Business Line : Guarseed to trade firm in short term

After sharp fall, guarseed seems to be on a recovery path on NCDEX. Despite a drop in production, guarseed prices was bogged down due lack of demand from the global markets.

India exports about 75-80 per cent of its produce every year. Thus, the demand from overseas market is one of the major factors which affect the guar prices. Since two years guarseed exports have bucked the trend and are showing signs of weakening. Last year, India exported 2.20 lakh tonnes (lt) of guargum against 2.40 lt shipped the previous year, a drop of 8 per cent largely due to weakness in the dollar. Even as the dollar gained strength against rupee in the current year, exports are likely to be affected by the economic slowdown and may decline by 10 per cent.

Output drops

On the supply side, production has declined to 8.5-9 lt against 10.5-11 lt in 2007-08. Carry overstocks of last year are around 2.5-3 lt. Thus, total supplies for 2008-09 stands at about 12 lt in the current crop season between October 2008 and September 2009.

Guar harvest was complete in December and almost 65 per cent of the crop has arrived in the markets. Stockists are holding the rest 35 per cent. At present the supplies are very less as stockists are not releasing the stocks at such lower levels.

Despite normal supplies in the current crop year, guar prices fell in the last few months, as exports were hit drastically due to economic slow down. The near month January contract has appreciated 4 per cent to Rs 1,528 a quintal on Friday from Rs 1,474 a quintal on January 1. The March delivery contract closed at Rs 1,582 a quintal.

Volatile 2008

Guar complex traded on a volatile note last year with prices touching a two-year high and three-year low driven mainly by the macro economic factors. Prices rallied in the first half of 2008 and tested a high of Rs 2,172 a quintal in June 2008 due to rise in export demand.

The major reason behind the surge in export was the appreciating dollar against the rupee. However, guar prices started falling thereafter and tested the three year low of Rs 1,401 a quintal in December on global recession and fall in crude oil prices.

Outlook

The demand for guar gum which normally peaks in December remained weak this year due to downturn in global economy. However guar seed and gum prices have dipped to its three years low, the exporters and millers have started stocking guar seed and guar gum on expectations that the prices could recover once the overseas demand pick up.

Further, firmness in soyameal prices is also increasing the attractiveness of guar by products as a cattle feed. Good demand for by products such as churi and korma are keeping millers interested in processing guar.

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