The Hindu Business Line : Prices of guarseed, gum likely to rule firm

Chennai, Nov. 24 Prices of guarseed and guar gum that touched a record this week are likely to rule firm in the short term. They may get a shot-in-the-arm if the Organisation of Petroleum Exporting Countries decides to go ahead with its plan to increase production.

OPEC members will meet in Luanda, Angola, on December 22. Though OPEC members maintain that the output will be maintained at the same level, there is talk of the cartel planning to raise the supply in view of crude oil prices ruling above $75 a barrel the last few days.

Cluster beans

Guar or cluster beans is a legume crop that grows best in semi-arid regions. In India, guar is grown primarily in Rajasthan. It is also grown in Haryana, Punjab, Gujarat and Madhya Pradesh. It is a raw material to produce guar gum, which is used in various industrial applications such as paper and textile sectors, ore flotation, explosives manufacture. In the oil and gas sector, it is used for fracturing of the formation. It is also used as a thickening agent and as additives in food products such as instant soups, sauces, processed meat products, baked goods, milk and cheese products, yoghurt and ice-creams.

On Tuesday, guarseed December contracts were quoted at Rs 2,822 a quintal against Rs 2,821 on Monday. January contracts were Re 1 lower at Rs 2,869. Guar gum December contracts were quoted at Rs 5,905 (Rs 5,916) a quintal , while January contracts ruled at Rs 6,000 against Rs 6,016.

In the spot market, guarseed was quoted between Rs 2,743 and Rs 2,765 a quintal. Gum ruled at Rs 5,889.

“Guarseed prices have increased about Rs 300 and gum by Rs 500 a quintal in a fortnight’s time. This is despite arrivals being higher at 25,000-30,000 bags of 100 kg in the markets in the growing areas,” said Mr Jeevan Gandhi, President of Indian Guar Gum Producers’ Association.

“The arrivals may continue for another fortnight. By then, the harvests will get over. Though farmers may have stocks, they may not bring them to the market as they could look out for higher price. These farmers have also grown jowar and pulses that are fetching good prices. They would prefer to sell these than guar, which is seen as gold now,” he said.

Export demand up

Demand for export of guar gum has already picked up. The US and China are proving to be the biggest buyers. “China has actually bought guar splits and not gum. They will convert these splits into gum,” said trade sources. Guarseed is converted to splits when the husk is removed from the endosperm.

“Once the supply becomes tight after the harvest gets over, prices are expected to rise further. Until the harvest gets over, prices will rule firm,” said Mr Gandhi.

One of the reasons for tight supply this year is a nearly 75 per cent drop in the crop production. Guar production this year is projected at 2.5 lakh tonnes against 10 lakh tonnes last year.

The current arrivals are mainly in Rajasthan, which accounts for nearly 70 per cent of the country’s crop. Prolonged dry weather and an erratic monsoon this year dented the guar crop’s prospects.

If the price rise has been capped to some extent, it is due to a carryover stock of 3 lakh tonnes of guarseed and 1.5 lakh tonnes of guar gum from last year.

Three lakh tonnes of guar seed will yield 75,000 tonnes of gum. Though 2.25 lakh tonnes of gum will technically be available, some portion of it is expected to be held back by farmers and traders.

That, according to traders, will result in only 1.75 lakh tonnes of guar gum being available to meet the demand. While domestic guar gum consumption is likely to be 50,000 tonnes, export demand is estimated at 1.5 lakh tonnes, leaving a short supply.

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