Guar prices rise following weak monsoon forecast

Guar plants
Howard F. Schwartz, Colorado State University, Bugwood.org

Since hitting drastically low levels in March, guar prices started to bounce back after an increase in demand from the shale gas sector and predictions of a poor monsoon season. While waiting for further monsoon predictions prices are expected to hold.

The price of guar seed increased by over 35% in March on the National Commodity and Derivatives Exchange (NCDEX) up from $56 per 100kg to $81 per 100kg, guar gum has rose by 47% from $136 per 100kg to $199 per 100kg. From October to March the price of guar seed dropped by around 38% and guar gum by 52% due to a decrease in demand from the shale gas industry.

Over 55% of the guar gum produced in India is exported to the United States for use in hydraulic fracturing, with China, Russia and Germany also importing large quantities. Guar gum powder has unique binding, thickening and emulsifying qualities, which when added to fracturing fluid help deliver proppants into the formation. During the harvesting season last October, when the price of guar was high and oil low, many in the shale industry started to develop cheaper and more reliably available alternatives, despite this the demand started to pick up again in March as the price of guar fell.

With guar prices low and exports slowly rising, traders and other manufacturers, such as textile and food industries, started to stock up on the commodity. Traders also expect demand from the shale gas sector to increase as oil prices start to rise. Whilst this increase in demand has helped the price of guar recover somewhat, worries of a weak monsoon have had a bigger impact on the price.

Guar is generally sown after the start of the monsoon in the second half of July to early August and is harvested in late October to early November. Guar is naturally rain fed, requiring good rainfall in the first and last week of September when the seed is maturing, depending on the monsoon rainfall the total size of the guar crop varies from year to year.

The Indian Meteorological Department’s (IMD) recently released monsoon prediction suggests below-average rains, due in part to El Nino, leading many in the market to speculate that this year’s guar harvest will be smaller, therefore driving prices up.

For now, prices are expected to remain fairly stable while the market awaits further IMD forecasts.

Photo: Howard F. Schwartz, Colorado State University, Bugwood.org

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