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Export demand key for guar seed prices.

Date: 21-08-2019
Subject: Export demand key for guar seed prices
Guar seed area in Rajasthan has been picking up in recent weeks due to good rains in producing districts. Guar area increase by about 55.8 per cent within a week to 22.6 lakh hectares (ha) as on first week of August from 14.5 lakh ha during the end of June as per data from the state agriculture department. 

The sudden increase in area has been keeping the prices under pressure. Guar seed futures fell about 2.5 per cent in August to Rs 4,200 per 100 kg. Moreover, guar gum exports are also disappointing in the first quarter. According to the Commerce Ministry data, guar gum exports was lower 5.6 per cent on year to 1.27 lakh tonnes. 

Earlier in the season, it was consolidating above the Rs 4,300 level as stocks were lower with farmers and stockists due to continuous drop in production in the last five years coupled with steady increase in guar gum exports. 

In 2019, guar seed futures slipped during Jan-Feb period due to sufficient arrivals. However, it recovered about 10 per cent in March from February lows supported by good export demand and reports of El Nino. The demand for guar gum as a hydraulic fracturing agent increased after crude oil prices started rising from $45 a barrel in October to $72 a barrel in April. Crude oil prices have now slipped below $60 a barrel. 

Area under guar has been declining over the years in Rajasthan during due to comparatively lower price realisation by farmers. The price realisation from pulses, oilseed and cotton is higher for farmers compared with guar seed. Thus, in 2019-20, guar seed area in Rajasthan is expected to be around 30-32 lakh ha against over 50 lakh ha in 2013-14, a dip of 40 per cent in six years. 

Guar seed production over the years has dropped considerably as farmers have cut guar area in Rajasthan due to higher return in pulses and oilseed. Last year (2018/19) production was lower by 17 per cent on year to 10.3 lakh tonnes according to the third advance estimates by Rajasthan government compared with 12.4 lakh tonnes in the previous year. 

However, the state government has projected guar production to increase by 45.5 per cent during 2019-20 (July-June) season to 15 lakh tonnes as farmers had more profits last year compared with the previous three years. 

Guar output is expected to rise on anticipation in sharp rise in yields to 500 kg per ha compared to 334 kg last year. 

In the first half of the current calendar year, guar seed prices were higher compared to last year due to lower production and steady guar gum exports. However, we expect that good monsoon rains, weaker rupee, low crude oil prices and declining will keep prices under pressure in the coming weeks. Moreover, demand for guar gum exports in the recent months has been lower due to higher prices. 

Currently, we see a strong support at the Rs 4,100 level and going forward, the prices may only pick up if export demand improves, while lower acreage in Rajasthan, Haryana and Gujarat will also support prices in the long run. 

Source: economictimes.indiatimes.com

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