Pune: Guar gum traders said although the futures market is expecting an uptick in prices, any increase will not be sustainable for long as demand may take time to revive while the supply side remains strong.
India is the world’s largest manufacturer and exporter of guar gum. The export dependence of traders keeps prices volatile. However, prices have remained largely stable for several months in the range of Rs 55-65 per kg.
Low prices discouraged farmers, who opted for other crops during the ongoing kharif season. “As the area sown under guar has reduced, we expect that production may fall from 9 million bags of 100 kilograms each in the previous year to about 7.5 million bags this year,” said Dilip Sarda, a guar gum manufacturer from Rajasthan.
Guar gum is mainly grown in Rajasthan, Haryana and Gujarat. The spit seeds are used for manufacturing powder, which is mostly exported.
However, analysts expect the futures prices to increase within the next fortnight.
“The farmers have preferred cultivating cotton, millet and paddy mainly during the kharif season over producing guar because the prices have been on the lower side,” said a research note from SMC Global. “The NCDEX guar gum futures (October contract) will probably gain towards Rs 6,300-6,350/quintal, taking support near Rs 6,150/quintal. In the present scenario, the millers are preferring new guar seed with high moisture because viscosity will be higher in powder made from new seed. Higher viscosity means higher price of guar gum powder.”
Sarda said any increase in guar gum prices cannot be sustained for long. “The industry is carrying a huge carry-forward stock, while the oil industry demand will increase only gradually,” he said.
Oil drilling industry, which has been badly hit by the pandemic, is the main user of guar gum. “There has been hardly any demand from the oil industry during the past six months. Food industry, which is the second largest consumer of guar gum, has come back to using the commodity as prices have fallen and, at the moment, is shouldering the demand for guar gum,” said Dilip Soni, director, Shree Ram Colloids.
Soni said the industry recently saw some signs of recovery. “After seeing some signs of recovery, oil prices crashed again on the news of US President Donald Trump getting Covid-19. Hence, it is difficult to predict the demand,” he said.