Guar exports to surge as price falls.

A record plunge in the prices of guar gum, a thickening agent used for oil and gas extraction, may boost exports from India, as demand revives among US drilling companies and European food processors.

Shipments may surge as much as 50 per cent to 500,000 tonnes in the year that began on April 1 from 333,000 tonnes a year earlier, said Rajesh Kedia, director at Jai Bharat Gum & Chemicals, India’s third-largest exporter. Shipments increased about 30 per cent to about 210,000 tons in the five months through August, he said.

Prices slumped after India, the world’s largest producer, banned futures trading in March 2012 to curb speculation and record rates cut demand from users.

Guar prices may continue to fall, Mark McCollum, Halliburton’s chief financial officer said Sept. 19. The importers will definitely buy more as prices are attractive, Chowda Reddy, a senior manager at Inditrade Derivatives and Commodities, said. Demand will increase. Guar gum futures slumped more than 50 per cent since May 15, when the Indian exchanges restarted trading after a 14-month ban.

The regulator suspended trading in March 2012 after prices rallied more than nine fold in one year to Rs 95,920 ($1,527) per 100 kg (220 pounds) on the National Commodity & Derivatives Exchange (NCDEX) in Mumbai.

“Production is seen exceeding demand for a second year,” Kedia said. Processors need 1.8 million tonnes of guar seeds to meet export demand of 500,000 tonnes of guar gum, he said. Seed production in Rajasthan, Gujarat and Haryana states, which together account for more than 99 per cent of India s harvest, is estimated to drop to 12 percent to 2.15 million tonnes in the year started July 1 from a year earlier, government data showed.

The erratic rains and long dry spell in western parts of Rajasthan were responsible for the lower production, said JS Sandhu, a joint director in the state’s agriculture department. “Inventories of about 800,000 tons of guar seeds will make up more any shortfall in output,” Kedia said. India accounts for more than 70 per cent of the global output of guar, which means cow food in Hindi, according to the Multi Commodity Exchange of India (MCX).

Guar gum is used in the pressure-pumping technique known as fracking, which blasts water mixed with sand and chemicals underground to free trapped hydrocarbons from shale formations. It is made into a thickening gel used to carry sand down a well and into the cracks created from fracturing.

It is also used as an ingredient in food emulsifiers, additives and thickeners. Guar gum for delivery in December fell 0.6 per cent to Rs 14,620 per 100 kg in Mumbai on Saturday. “Some of the drilling companies, which began using alternative products to guar gum after the price surge last year, may return to the commodity, as availability is assured at lower prices,” Kedia said.

“If prices continue to fall, there may be a negative impact on guar crop next year,” Kedia said. “Farmers are disappointed that guar prices have declined below their expectation.”

Source : mydigitalfc.com