Guar exports from India seen surging as price slump spurs demand

New Delhi : 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% to 500,000 metric tons in the year that began on 1 April from 333,000 tons a year earlier, said Rajesh Kedia, director at Jai Bharat Gum & Chemicals Ltd., India’s third-largest exporter.

Shipments increased about 30% 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. Rising supplies may further pressure prices, lowering costs for users Halliburton Co. and Baker Hughes Inc. Guar prices may continue to fall, Mark McCollum, Halliburton’s chief financial officer said 19 September.

The importers will definitely buy more as prices are attractive, Chowda Reddy, a senior manager at Inditrade Derivatives and Commodities Ltd., said in a phone interview from Hyderabad. Demand will increase.Guar gum futures slumped more than 50% since 15 May, 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 kilograms (220 pounds) on the National Commodity & Derivatives Exchange Ltd. in Mumbai.

Production is seen exceeding demand for a second year, Kedia said in a phone interview from Bhiwani in Rajasthan. Processors need 1.8 million tons of guar seeds to meet export demand of 500,000 tons of guar gum, he said. Seed production in Rajasthan, Gujarat and Haryana states, which together account for more than 99% of India’s harvest, is estimated to drop to 12% to 2.15 million tons 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 J.S. 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% of the global output of guar, which means cow food in Hindi, according to the Multi Commodity Exchange of India Ltd. The seed is also grown in Pakistan and the US
Fracking 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% to 14,620 rupees per 100 kilograms in Mumbai on Thursday. 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.