Guar seed glut drags prices; farmers in distress

Ishwarbhai Chandrasana of Choladi village at Dhrangadhra near Surendranagar in Gujarat has over 2,000 kg of guar seed stacked up in his house for the past six months.

His estimation that guar would earn him more than other kharif crops went haywire when the oversupply of the seed crop knocked down prices to a three-year low.

Since January, guar seed prices have hovered in the range of ₹2,930-3,525 a quintal, against a peak of ₹30,000 in 2012-13.

“The cost works out to around ₹2,000 a quintal including labour, fertilisers, etc. Given this, the current prices are not remunerative at all. We expected multiple times return as was seen three-five years ago. But the scenario has completely changed. We are holding on to our crop waiting for a spurt,” says Chandrasana, who had sown guar on about 80 bigha (approximately 38-40 acres). Guar or cluster beans, a leguminous crop, is primarily grown in Rajasthan, besides Haryana, Punjab, Gujarat and Madhya Pradesh. Rajasthan accounts for over 70 per cent of the total crop in the country.

Guar seed is a raw material for producing guar gum. Guar gum is used as a thickening agent and additive in food products such as instant soups, sauces, processed meat products, baked goods, milk and cheese products, yoghurt and ice-creams. It has industrial applications in the paper and textile sectors, ore flotation, explosives manufacture and fracturing of oil and gas formations.

Currently, guar gum is in demand for fracking of shale gas, particularly in the US that accounts for 25 per cent of the world trade.

The situation in other parts of Saurashtra is no different. While relatively larger farmers have in-house facilities to store their crop, many small and medium farmers packed their crops in woven sacks and dumped them at warehouses of the Agriculture Produce Market Committee (APMC).

At Jamkhambhaliya taluka of Devbhumi Dwarka district in Saurashtra, a large volume of unsold stock of guar seed has been lying for more than past eight months.

“At lower prices, it is unviable to take the crop to other towns. Therefore, farmers asked us to allow them to keep the stock at the APMC warehouses. Since we are experiencing a lean period, with water scarcity and no agro trading, we gave them permission. Roughly more than 10,000 kg of seed has been lying for the past eight months,” said Pratapsinh S Jadeja, Chairman of the APMC in Jamkhambhaliya.

On the National Commodity & Derivatives Exchange (NCDEX), guar seed futures for October contract hovered around ₹3,241/quintal. That’s about half of the ₹6,040 seen in September 2013. Given the pile-up of stocks, experts see prices remaining under pressure for longer.

“We see a further downside in guar seed in the absence of demand. Currently, farmers are holding the crop. But when they run out of holding capacity, there will be panic selling. This could bring down prices to as low as ₹2,000 per quintal,” said Jagdeep Garewal, analyst at Kunverji Commodities in Ahmedabad.

Due to the glut in the market, farmers are likely to turn to other crops; guar crop production may fall by half from around 24.5 lakh tonnes in 2015-16.

Notably, before 2009, the crop production was a mere 8-9 lakh tonnes.

“Even if the crop declines by half, it will add to the existing inventory, thereby putting further pressure on the prices,” said Garewal, ruling out any possibility of an immediate relief for farmers.

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