Guarseed May Gain On Increasing Demand

Mumbai: Despite higher production estimates, guarseed futures are expected move up in medium to short term on the back of 30 per cent increase in demand.

According to trade sources, production is likely to rise by a lakh tonne to 8.5 lakh tonnes in 2007-08. Carryover stocks are around 2 lakh tonnes.

Arrivals, which have peaked in Rajasthan, Harayana and Punjab, are likely to continue till Decemeber. “Arrivals from Punjab and Haryana have started mid-October. The markets have been receiving up to one lakh bags a day and is expected to remain strong till first week of December,” said Ganesh Pai, a trader.

About 70 per cent of the guarseed is grown in Rajasthan. However, of late, Haryana and Punjab have increased their share of contribution as farmers have started using irrigated land for growing guarseed.

Guarseed is sown in July and a rainfall of 6-9 inch is much in that period. The average annual production is about 7-8 lakh tonnes and varies according to rainfall received.

The demand from about 150 guargum manufactures, which are primarily located at Bikaner and Jodhpur in Rajasthan, have been strong. Guarseed is split to be processed to guargum and then to guar powder. The average annual demand is about 6-7 lakh tonnes including India’s 50,000 tonnes and excess production is exported by way of guargum or guar splits. Exports during 2005-06, increased sharply to 1.80 lakh tonnes from 1.30 lakh tonnes the previous year due to high demand from China.

Rupee appreciation

India exports guargum and splits to US, UK, China and Japan. US one the largest importers from India accounts for nearly 40 per cent. Prices this year have come down sharply from a high of Rs 2,000 per quintal to Rs 1,580 per quintal due to rupee appreciation against dollar and contamination issue raised by European Union. Exports have come to a standstill in February and March and resumed, albeit in lesser quantities, after apprehension were cleared. Exports are likely to pick up in December and January.

“A sharp spike in prices is ruled out as arrivals may continue till December end. However, in 2-3 months prices are expected to touch Rs 1900-1950 per quintal from the current level of Rs 1,600 per quintal in the spot markets,” said Sushil Sinha, regional head, Karvy Commodities.

“The strategy on futures market could be to buy in January contracts at dips to Rs 1,700 level for a target of Rs 2,000,” he added.