Unrelenting demand driven by oil rigging companies has led to guarseed and guar gum prices sky-rocketing in spot and future markets. On the spot market, guarseed prices topped Rs 6,000 a quintal on Wednesday, while guar gum crossed the Rs 20,000 a quintal barrier.

In Jodhpur, spot guar gum ended at Rs 20,800 a quintal on Wednesday, up from Rs 19,876.30 on Tuesday. Guarseed prices closed at Rs 6,300 a quintal. Prices of both have increased by about 25 per cent since the beginning of this month.

In the futures market, guarseed January contracts on the National Commodity and Derivatives Exchange (NCDEX) ended at Rs 6,494 a quintal, while guar gum January contracts was quoted at Rs 20,800.

“Guarseed and guar gum prices have hit the upper circuit for the second day continuously despite NCDEX imposing a special 10 per cent margin on the guar counter,” said Ms Vedika Narvekar of Angel Broking.

“One of the surprising aspects of the rally in guarseed and guar gum is that it is taking place at a time when harvest is on and arrivals are at the peak. About 1.5 lakh bags (100 kg each) are arriving every day. Such rallies usually occur during February/March. Nevertheless, the rally seems to be on fundamental factors,” she said.

SURGING EXPORTS

The rally is being supported by surging exports of guar gum. “Last year, exports doubled to four lakh tonnes with a higher crop of 15 lakh tonnes. This year, exports could easily cross five lakh tonnes,” said Ms Narverkar.

Guarseed production last year rebounded to 15 lakh tonnes from around 2.5 lakh tonnes in 2009. This year, production is estimated to be around 12 lakh tonnes.

According to the Agricultural Products Export Development Authority, guar gum exports were up 82 per cent during April-July compared with the same period a year.

A guar gum manufacturer-cum-exporter, who did not wish to be identified, said huge demand for oil drilling was driving the guar market up. “Buyers from the US are driving it crazy,” he said.

NO CARRYOVER STOCKS

“Though production was record last year and is good this year, there has been virtually no carryover stock. What is being produced this year is consumed now itself,” the manufacturer-cum-exporter said.

Guar, a leguminous crop, is primarily grown in Rajasthan, besides Haryana, Punjab, Gujarat and Madhya Pradesh. Rajasthan accounts for 70 per cent of the total crop in the country. Guarseed 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. India is the major producer of guar seed and gum, accounting for 80-85 per cent of the total global supply.

SHORTAGE FEAR

Buyers are stocking up guar gum fearing there could be shortage or they could run out of stocks, he said, adding that most of the buyers were building inventories.

With oil drilling companies buying guar gum “left, right and centre”, other users are keeping a low profile.

“For example, the price is unworkable for the textiles sector and therefore, its buying has stopped,” the manufacturer-cum-exporter said.

The paint and construction industry, too, has cut its usage, while the food processing sector is finding the going tough. “The food sector may not be able to sustain buying at current prices,” he said.

For now, neither analysts nor producers nor buyers are sure how far the rally will proceed.

mrsubramani@thehindu.co.in

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