Guar prices declines on good rain forecast and weak crude oil prices: Angel Commodities Broking

Author(s): 

Mr.Ritesh Kumar Sahu (Fundamental Analyst– Agri Commodities, Angel Commodities Broking): “Guar complex prices have plunged about 6% this week on forecast of rains in the western Rajasthan during the current week. Moreover, weak crude oil prices too support the fall on anticipation of lower exports demand in coming months. On National Commodities and Derivative Exchange (NCDEX), Guar seed prices drop from the high of Rs.3,546 per quintal to Rs.3,342, while guar gum fall by about Rs.484 from its highs on Monday to Rs.7,165 per quintal.

Western Rajasthan, where most of guar is grown, received 17.3 mm rainfall in the first 20 days of the monsoon season, 26% above the normal weighted average of 13.7 mm. Rains so far have been above normal in Rajasthan. As per the weekly forecast of NOAA/ National Weather Service, rains are forecasted in the guar producing districts of Churu, Ganganagar, Bikaner, Nagaur, Hanumangarh etc.

The prices of guar seed and gum on NCDEX have recently seen rising during the second week of the current month on reports that the exports of guar gum during last year have been encouraging due to increasing rig count in the United states.

As per the reports, US rig count (747) currently at highest level since April 2015 results in increase in US drilling activities and shale production. US is the largest export destination from India, account for an average of about 45% of total gum exports in last three years.

Moreover, prices have been increasing on anticipation of lower acreage in Rajasthan in coming kharif season. According to market sources, the acreage of guar seed may be lost to either cotton (non-irrigated fields) and pulses (irrigated fields) as farmers and stockists have not realized good prices during last year.

As per the Department of Agriculture Rajasthan 2nd advanced estimates for 2016-17 crops, guar seed production is estimated to decline at 14.25 lakh tonnes as against 22.23 lakh tonnes in 2015-16.

The area under guar seed in Haryana, second largest guar producing state after Rajasthan, is expected to be lower for the second consecutive year. Last year the area was about 2.6 lakh hectares against the normal area of 4 lakh hectares. Traders are expecting that the farmers may move to cotton this season.
However, exports of guar gum during 2016/17 have been encouraging. According to Agricultural and Processed Food Products Export Development Authority (APEDA), India's guar gum exports in 2016/17 were 4.23 lakh tonnes, up 28% on year compared to 2015/16. In 2015/16, country exported about 3.30 lakh tonnes of guar gum.

However, the exports of guar gum in April 2017 dropped by 11% to 54,392 tonnes as compared to 61,457 tonnes in March. As per trade sources, the exports of guar gum during April was down due to lower crude oil prices. The crude oil prices have been constantly falling in the current month may result in the drop in guar gum exports from the country despite increase in rig count in the US.

Outlook in Guar seed turned bearish as India Meteorological Department (IMD) is expecting near normal monsoon rains which may encourage farmers to plant more of guar seed due to lower production cost as compared to pulses and oilseeds. However, the prices may get support if the crude oil prices recover and export demand started to increase.”

Date: 
Wednesday, June 21, 2017